How much do student loans affect credit score?
Student loans are a form of borrowing that can take different forms, from government-backed loans to private loans. Student debt can seriously affect your credit score regardless of the type of loan you avail for yourself.
This blog post will explore how much student loans affect credit score so that you can make informed decisions about your debts and borrowing.
Types of Student Loans
Generally speaking, you will find two types of student loans. The first is a federal student loan, and the second one is a private student loan.
Moreover, federal student loans are primarily sponsored by the Department of Education, while you can apply for private student loans from any bank or financial institution.
Whether you have federal or private student loans, they will be classified as installment loans.
Generally speaking, late or missed payments can severely affect your credit score by up to 50 to 100 points, according to expert credit counselors. However, this impact can be more damaging in some cases, especially if you have a federal student loan.
Besides, you need to know that each missed student loan payment, whether you have a private student loan or a federal student, will have a negative impact on your overall credit score.
What is Credit Mix and its relation to student loans?
Student loans can damage your credit score and affect your “credit mix.” If you are unaware of the credit mix, let me elaborate. In simple words, credit mix is the mixture or combination of your outstanding debts. The credit mix is crucial and contains your installment loans, revolving credit and other debts.
Your credit mix will be better if you pay your student loans timely. However, if you don’t, it will be severely affected.
Can a Late or Missed Student Loan Payment Disturb My Credit?
Yes, a late or missed payment can disturb your credit. The overall weightage depends on how late you make the payment and when your lender reports the same to the credit bureaus. In severe cases, these late or outstanding payments can endure and result in a default status.
Furthermore, if you avail federal student loan, late payments will be stated to credit bureaus after 90 days. However, if you avail a private student loan, your lenders or creditors can report them early. As per FICO, lenders can report missed or late payments at 30, 60, 90, 120 or 150 days late.
Additionally, FICO states that higher overdue payments can be worse for you and your credit score.
Monitoring Your Credit and Student Loan
Whether you avail a federal student loan or a private student loan, your credit score will move, and you will see some variations in your credit score and report. In some way, your credit will get affected. Due to this reason, we recommend using credit monitoring so that you can monitor your credit score, history as well as student debt.