How do student loans impact your credit score?

Student loans on your credit report can have positive and negative results on a credit score.

Since student loans are a type of installment credit, having them on your credit report adds to your “credit mix,” which makes up 10% of your score calculation. This is good for your credit since it adds variety to the kind of loan products you have and shows you can manage different types of debt.

Take note, however, that there are risks to carrying a big installment loan, such as a substantial amount of student debt. The continuous payments may make it more difficult to save. In addition, the large debt load boosts your debt-to-income (DTI) ratio, which can influence your ability to borrow more, such as a mortgage loan.

How else student loans affect your credit score depends a lot on how you manage your monthly payments. Payment history is the most important factor in determining your credit score, accounting for 35% of its calculation.

If you make your monthly payments on time, student loan debt won’t necessarily harm your credit score. On the other hand, if you are late on payments (considered “delinquent”), in default (late on payments for 120+ days), or see your debt go to collections, this can cause your credit score to drop.

Treat your student loan the same way you would treat any other loan, and that means making your payments on time each month.

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