Nerdy takeaways
- Both federal and private student loans can impact your credit score.
- Pay your student loans on time to build your credit. Missed payments can hurt your score and stay on your credit report for seven years.
- If you’re struggling to pay your bill, ask your lender or servicer for relief options before missing a payment.
Student loans affect your credit score in much the same way other loans do: Repaying the loan on time will strengthen your credit — and paying late will hurt it. Unlike other loans, student loans may offer grace periods that allow you to delay payments.
Once you enter student loan repayment you generally must make monthly payments until your loan is paid off. Your federal loan servicer or your private loan lender reports these payments to credit bureaus, and then you begin to establish a solid track record of managing credit. Regular, on-time payments can help grow your credit score over time.
You have a right to see the information the credit bureaus keep. You can check all three major bureaus’ reports for free each year, and you can check a free credit report from TransUnion through NerdWallet whenever you want. That one updates weekly.
Here’s what you need to know about student loans and your credit score.
» MORE: How to pay for college
Key factors: How student loans impact your credit score
Generally, student loans are installment loans, which means you pay a specified amount for a certain time period. Student loans can impact several components of your credit score:
- Payment history.
- Length of your credit history.
- Credit mix.
- Amounts owed.
- Recent applications.
Payment history
Payment history is the most important factor credit scoring companies (like FICO and VantageScore) consider when calculating credit scores. That’s why paying your student loan bill on time every month is crucial to building your credit. Your score will start to drop after your servicer or lender reports your late payment to one or all of the three major credit bureaus.
How long before it’s reported depends on the type of loan you have:
- Federal student loans. Servicers wait 90 days or more to report late payments.
- Private student loans. Lenders may report late payments after just 30 days. Contact your lender or check your loan origination documents to verify the terms of your loan.
Servicers and lenders may also charge late fees as soon as you miss a payment.
» COMPARE: Federal vs. private student loans
If your servicer or lender does report your late payment, also known as a delinquency, it will stay on your credit report for seven years.
The more overdue your payment, the worse the damage to your credit. For instance, if you don’t make a payment for 270 days your federal student loan will go into student loan default. That will hurt your credit even more than a 30- or 90-day delinquency. Private student loans may default anywhere from 90 to 180 days depending on your specific loan terms.
Length of your credit history
Although it’s not the most important factor in determining credit scores, the longer your credit history, the stronger your credit score may be. This is because a longer credit history demonstrates your ability to manage credit and debt over time. For many people, student loans are their first foray into debt repayment, helping them establish a long credit history before taking out larger loans, like mortgages.
Credit mix
If you've never used credit before, or used only one type of credit (like a credit card), then having a student loan can be good for your score because it adds to your credit mix — as long as you make your payments on time. But credit mix is a smaller score factor, so it's not worth taking out a loan just to have a mix of credit types.
Amounts owed
Credit score calculations consider the amount of debt you owe, which includes the amount you owe on an installment loan like a student loan. Your score benefits when you pay down your student loans, and it shows lenders you can manage debt responsibly.
Recent applications
Each student loan application that requires a hard credit check could temporarily lower your credit score by a few points.
Most types of federal student loans, including all federal loans for undergraduates, don’t require a credit check. However, federal direct PLUS loans, available to parents and graduate students, do require one.
Private lenders typically require a credit check. When shopping around for private student loans, prioritize lenders that offer a soft credit check to pre-qualify, so you can compare interest rates with no impact to your credit score.
Try to avoid applying for student loans during a time when you’re also applying for other kinds of credit, like credit cards, a car loan or mortgage. Spacing out applications every six months should lessen the credit impact.
How to protect your credit score if you can’t pay your student loans
Sometimes money gets tight. In those situations, ask your lender about lowering or pausing your monthly student loan payments. You might be able to:
- Sign up for an income-driven repayment (IDR) plan if you have federal loans. You could get your monthly payments as low as $0, depending on your income.
- Apply for a modified payment plan if you have private loans and your lender offers this option.
- Enroll in deferment or forbearance to temporarily pause your monthly payments.
Changing the terms of your loan does not hurt your credit score. As long as you handle payments as agreed — even if that means paying $0 per month — your credit score shouldn’t suffer.
If you do let your credit score fall by missing student loan payments, it may become more difficult to qualify for new credit cards, mortgages, car loans, apartment rentals and even cell phone contracts.
Student loans taken out by parents, such as federal parent PLUS loans and private parent loans, affect only the credit of the person who took out the loan. So if a parent takes out a federal parent PLUS loan to help you pay for school, it affects their credit. On the other hand, a private student loan you took out and a parent co-signed appears on both of your credit files and can affect both of your scores.
How refinancing student loans affects your credit score
If you apply to refinance your student loans with a private lender, the lender will perform a credit inquiry on you.
It’s smart to shop around for the lowest rate before refinancing, especially if you can do it without dinging your credit. Multiple hard credit report inquiries can temporarily shave a few points off your credit score. Either of the following options can help you avoid that:
- Apply for all the loans you’re comparing within a 14-day period. Under the FICO credit scoring model, multiple hard inquiries of the same type — such as student loan inquiries — count as a single inquiry if they happen within a short period. Various versions of the credit scoring model specify different time frames — typically from 14 to 45 days — but you’ll be covered under all of them if you submit all your applications within 14 days.
- Get soft rate estimates through lenders’ pre-qualification processes. Some lenders let you get a “soft” rate estimate that won’t affect your credit. Prioritize these lenders when shopping around.
How credit scores impact your ability to borrow new student loans
All of your student loans can affect your credit. But you may not need good credit to take out a student loan in the first place.
- Federal loans. Most federal loans do not require a credit check when you apply. Only federal direct PLUS loans, available to parents and graduate students, require a credit check. Your credit score won’t affect your student loan’s interest rate; all PLUS loans disbursed in the same year have the same rate.
- Private loans. Private loans typically require that at least one borrower have good credit. The lender will perform a credit check to determine whether you qualify for the loan. The higher your credit score, the lower the interest rate you’ll likely receive. Often, undergraduate students with no credit history will need a co-signer with strong credit and income to qualify for private student loans.
