Does Student Loan Affect Credit Score
If you’re struggling to pay off student loans, you’re not alone. According to Experian, more than 44 million Americans have outstanding student loan debt totaling $1.5 trillion dollars. While there are many ways you can deal with this financial burden — such as refinancing or consolidating loans — one thing that isn’t often talked about is how student loans affect credit scores. In this article, we’ll explore what impact having a student loan actually has on your credit score and whether missing payments will damage it even further.
Your loan payment history is reported to the credit bureaus.
When you make loan payments, they are reported to the credit bureaus. If a lender reports that you paid your loan on time, it is considered a positive factor in your credit score. However, if a lender reports late payment, or defaults on the loan entirely, this may negatively impact your score.
Defaulting on your student loans can be detrimental.
If you default on your student loans, there are a wide range of disastrous consequences that can follow.
- Wage garnishment: Your wages may be held until the debt is repaid. In most states, up to 15% of your wages can be garnished for any and all debts, including student loans.
- Tax refund offset: In addition to wage garnishment, the IRS can use any tax refunds or other federal payments (like Social Security) as part of their collection efforts if you don’t repay your student loan in full within five years after leaving school. If it’s been longer than five years since graduation, they’re also allowed to take 25% of any future tax refunds until the debt is satisfied—with interest!
- Professional license suspension: Defaulting on federal student loans may lead to suspension of professional licenses like teaching certificates or medical licenses through state licensing boards (for example). This means that if you want to practice medicine or whatever else requires a license in order to work legally in the field—and earn money doing so—you won’t be able to once this happens!
Having student loans won’t damage your credit, but missing payments will.
If you have student loans, you’re probably wondering if your debt will affect your credit score. The short answer? It won’t. Student loans aren’t reported to the major credit bureaus—the companies that create and track your credit scores—and they don’t cause any negative marks on your report until you miss payments on them.
But what happens when you do miss payments? How will that affect my ability to get a car or house someday? Don’t worry! Missing payments on a student loan won’t necessarily ruin your chances at buying a home or car anytime soon. In fact, most student loan servicers allow borrowers who are struggling financially to enter into a forbearance plan in which no payments are required for up to 12 months at a time (or longer if necessary). This allows borrowers with temporary financial issues like unemployment or medical problems time to catch up while still keeping their credit intact (as long as they pay all of their other bills).
If you’re a student or have children who are heading off to college, you may be wondering about the impact of student loans on credit scores.
If you’re a student or have children who are heading off to college, you may be wondering about the impact of student loans on credit scores. Student loans are reported to the credit bureaus (Experian, Equifax and TransUnion). If you default on your student loan, it can be detrimental to your credit score because it shows that you’ve failed to keep up with an obligation. Having a student loan doesn’t damage your credit score by itself, but missing payments will.
If you’re a student or have children who are heading off to college, you may be wondering about the impact of student loans on credit scores. While having student loans won’t damage your credit, missing payments will. Keep track of your loan payments and make them on time so that you don’t risk damaging your credit score in the future!