With as much emphasis that is placed on the negative components of having student loans, there is some good news from student loans and your credit score. In particular, student loans can help with your credit score if you are a young graduate.

Credit.com states that your credit score is essentially calculated based on certain aspects of a consumer’s credit report. This can include payment history, debt levels, age of credit and debt diversity. If graduates can handle student loans successfully, this can actually help them to develop a good credit score early in their professional life.

It will help to establish a credit history especially for those individuals who may not be able to access revolving credit such as a credit card. If a graduate does have credit cards, student loans can greatly improve the diversity of their credit profile.

What if I owe a significant amount is student loans?

The amount owed on your student loans will actually have little impact on your credit score. The most important component is the payment history. This is one of the reasons why it becomes so important to take on manageable debt levels. If needed look into some of the income based repayment options that are offered to ensure that the payment history remains in tact. The amount owed may come into play when addressing your debt to income levels, but the amount will not necessarily impact your credit score.

What are the negative impacts of student loans?

Some of the negative impacts will be the same as not paying on your existing revolving credit lines. Late payments will most certainly hurt your credit scores and defaulting or a garnishment of your wages will most definitely have negative impacts on your score.

By every account measurable, it becomes important to work toward making you monthly payment and avoiding defaulting on your student loans. Making on-time monthly payments will most certainly help credit scores and it is easier to remain in good standing with your student loans provided the multiple repayment options that are currently available.

I want to buy a home. How will student loans impact this decision?

In a future post, we will talk directly with a mortgage profession about the impact student loans can have on the home buying process. Here we will go into much greater detail and gain a greater understanding as to how lenders view student loans. In the meantime, it becomes really important to simply keep your student loans in good standing. Suffice to say, they will most certainly have an impact.

You can get a copy of your credit report from the major credit bureaus annually for free by clicking here. You will see your student loans and other things that are being reported on your credit report. If you have further questions, please don’t hesitate to give us a call or email and we can talk directly about your situation. We can assess what your plans are for the future and if/how student loans will impact those decisions.