In the last few decades, college has become a lifelong investment in one’s future. That investment can come at a great cost, however, especially if students are unable to pay their student loans back. In the Sallie Mae Money Pulse Survey of recent college grads, only 26% of respondents felt they had good or excellent credit when they graduated, and 52% felt they had fair credit. If you have student loans that you’re struggling with, there’s hope on the horizon.
How Does a Loan Impact Your Credit Score?
When you borrow money, your credit score may be impacted. If you are looking to buy a house or car, the lender will want to know that you have the credit to support such a purchase. The more time that your loan is outstanding and in good standing, the better your credit score will be. To keep your credit score as high as possible, make sure that you’re current on payments and avoid taking out too many loans at once.
Your credit score is based on a variety of factors, including your credit history and your debt-to-income ratio. A loan will affect both of these in a negative way. If you have a large balance on your loan then this could lead to a lower credit score.
If you are struggling to pay your loans, there are a few ways you can try and improve your credit score. Loan consolidation can help to improve your credit score if you have had some trouble making your payments. It will also reduce the total amount of money you owe and make it easier for you to keep track of all your loans in one place.
When you take out a student loan, the lender requires that you make monthly payments on time. If you don’t make your payment on time, there is a risk of becoming delinquent (which is when your loan is in default) or in default. This could have significant consequences such as getting turned down for credit cards, loans and the ability to buy or sell a home. To avoid any consequences, consolidate your loan with one creditor to allow you to start fresh with one payment.
A lot of people have student loans, and many of them have a credit score that’s not as high as they’d like. You might not be able to borrow money from the bank at a low interest rate if you don’t have a good credit score. Credit scores are calculated using information on your borrowing ability and payment history. A low credit score could also affect your access to other financial products, such as mortgages and car loans.
Student loans can have a negative effect on one’s credit score. Although having student loans may be advantageous in the long run, it is important to maintain a low balance while paying back those loans so that they don’t affect one’s credit score.