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A credit score is a three-digit number that lenders use to decide if a borrower is creditworthy — which is why having a good credit score is important if you want to qualify for a loan. Your credit score can also impact whether you’ll be able to rent a home, get a cell phone, or land a job.
There are several things that can impact your credit score — including student loans.
If you’re wondering how student loans affect your credit score, here’s what you should know:
- How student loans affect your credit score
- What are the consequences of missed student loan payments?
- How to avoid student loan default
- Can student loans affect a cosigner’s credit score?
- Does paying student loans build credit?
- How does refinancing student loans affect credit score?
- Refinancing could help your credit score
How student loans affect your credit score
For many college students, taking out a student loan is their first experience with applying for a loan and establishing a credit history — but getting the loan is only the first part. You’ll also need to responsibly manage your student loans going forward to prevent damage to your credit score.
Student loans are a type of installment loan, meaning you’ll make payments in equal installments over a period of time until the loan is repaid. Making your loan payments on time can help build a positive payment history, which is one of the biggest factors that make up your credit score.
- Federal student loans: Most federal student loans don’t require a credit check and won’t affect your credit score to start. However, regardless of which kind of federal loan you get, it’s critical to make on-time payments to keep your credit as healthy as possible.
- Private student loans: If you apply for a private student loan, the lender will perform a hard credit check to determine your creditworthiness. This could cause a slight drop in your credit score — though this effect is usually only temporary, and your score will likely bounce back within a few months.
What are the consequences of missed student loan payments?
Missing payments on your student loans can significantly affect your credit score. A student loan is generally considered delinquent after one missed payment. If you miss payments for a certain amount of time — 270 days for most federal student loans and 120 days for most private student loans — your loan will enter default.
How long it will take for a late student loan payment to be reported to the credit bureaus and affect your credit score will depend on the type of loan you have.
- Federal student loans: Typically 90 days, depending on the servicer
- Private student loans: Typically 30 days, depending on the lender
Once a missed student loan payment is reported, it can begin dragging down your credit score. The more late payments you make, the worse the damage will be. Also keep in mind that a late payment can stay on your credit report for up to seven years, which could make it difficult to access credit in the future.
- Loan acceleration: Your entire balance could become due.
- Loss of hardship benefits: If you have federal student loans in default, you’ll lose access to major federal benefits and protections, such as deferment and forbearance options. You’ll also be ineligible for any other federal financial aid.
- Wage garnishment: In some cases, your wages could be garnished, or your tax returns could be withheld.
- Collection costs: Your loan holder might send your defaulted loan to a collections agency that will try to obtain payments from you. If this happens, you could be responsible for the collection costs incurred by your loan holder.
- Lawsuits: Private student loan lenders might sue you in an attempt to recoup their losses. This means you could get stuck with court costs or attorney fees.
How to avoid student loan default
If you’re struggling to make your payments, here are some options that could help you avoid student loan default:
- Sign up for an income-driven repayment plan. If you have federal student loans, consider signing up for an income-driven repayment (IDR) plan. On an IDR plan, your payments will be based on your income — typically 10% to 20% of your discretionary income. Additionally, any remaining balance will be forgiven after making payments for 20 or 25 years, depending on the plan.
- Request deferment or forbearance. Student loan deferment and forbearance are two ways to temporarily pause your payments. Keep in mind that interest will continue to accrue on loans in forbearance and might accrue on deferred loans, depending on the type of loan you have. Also note that while federal loans come with built-in deferment and forbearance options, private lenders provide this kind of assistance at their discretion. Contact your servicer or lender to see what options are available to you.
- Consolidate your federal student loans. If you have federal student loans, you can consolidate them into a federal Direct Consolidation Loan. With this option, you can extend your repayment term up to 30 years, which could greatly reduce your monthly payments. Just keep in mind that you’ll pay more in interest over time with a longer term.
- Refinance your private student loans. Student loan refinancing is the process of taking out a new private student loan to pay off your old loans, leaving you with just one loan and payment to manage. Depending on your credit, you might get a lower interest rate through refinancing, which could save you money on interest and potentially help you pay off your loan faster. Or you could opt to extend your repayment term to reduce your monthly payments — though remember that this means you’ll pay more in interest charges.
If you decide to refinance your student loans, be sure to consider as many lenders as possible to find the right loan for your situation. Credible makes this easy — you can compare your prequalified rates from our partner lenders in the table below in two minutes.
| Lender | Fixed rates from (APR) | Variable rates from (APR) | Loan terms (years) | Loan amounts | Min. credit score |
|---|---|---|---|---|---|
Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 2.94%+ | N/A | 10, 15, 20 | $7,500 up to $500,000 (larger balances require special approval) | Does not disclose |
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 3.85%+ | 5.43%+ | 5, 7, 10, 15, 20 | $10,000 up to $250,000 (depending on degree) | 690 |
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 5.39%+1 | 5.09%+1 | 5, 7, 10, 15, 20 | $10,000 to $500,000 (depending on degree and loan type) | Does not disclose |
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 4.49%+2 | 3.69%+2 | 5, 7, 10, 12, 15, 20 | $5,000 to $300,000 (depending on degree type) | Does not disclose |
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 5.91%+5 | 6.46%+5 | 5, 10, 15, 20 | $1,000 to $250,000 | 700 |
|
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 4.48%+3 | 2.99%+3 | 5, 7, 10, 12, 15, 20 | $10,000 to $250,000 | 680 |
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 5.18%+4 | 5.12%+4 | 5, 10, 15, 20 | $5,000 to $250,000 | 670 |
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 3.94%+ 7 | N/A | 5, 7, 10, 12, 15, 20 | Up to $300,000 | 670 |
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 4.75%+ | N/A | 7, 10, 15 | $10,000 up to the total amount of qualified education debt | 670 |
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 5.49%+ | N/A | 5, 8, 12, 15 | $7,500 to $300,000 | 670 |
|
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 5.29%+ | N/A | 5, 10, 15 | $7,500 up to $250,000 (depending on highest degree earned) | 680 |
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| Compare personalized rates from multiple lenders without affecting your credit score. 100% free! |
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All APRs reflect autopay and loyalty discounts where available | 1Citizens Disclosures | 2College Ave Disclosures | 5EDvestinU Disclosures | 3 ELFI Disclosures | 4INvestEd Disclosures | 7ISL Education Lending Disclosures |
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Can student loans affect a cosigner’s credit score?
A cosigner is someone who agrees to share responsibility for a loan, such as a student loan. If you take out a student loan with a cosigner and don’t make your payments, your cosigner will be on the hook, and their credit could be damaged.
Late or missed payments will also show up on your cosigner’s credit report — which could keep them from getting approved if they want to apply for a loan of their own, such as a mortgage. If you want to ask someone to cosign a student loan for you, make sure they understand these potential risks before they agree to anything.
Does paying student loans build credit?
Yes — by paying your student loans on time, you can establish a positive payment history and build your credit over time. The more on-time payments you make, the better shape your credit will be in.
- Diversifying your credit mix: Lenders like to see that you can manage different types of credit — including installment loans as well as revolving credit lines (such as credit cards). Taking out a student loan can add another kind of installment loan to your credit mix and boost your credit score.
- Lengthening your credit history: Another factor in your credit score is the length of your credit history. Depending on the type of student loan you have, it could take up to 20 or 30 years to repay it, which can add to your credit history length and improve your credit score.
How does refinancing student loans affect credit score?
Another way that student loans could affect your credit score is if you choose to refinance them.
When you apply for refinancing, the lender will perform a hard credit check to determine your creditworthiness.
This could decrease your credit score by a few points — though remember that this is typically only short-lived and your score will likely rise again within a few months.
This can also help you avoid applying with several lenders and having multiple hard credit inquiries, which could drag down your credit score.
If you want to apply with more than one lender to see your actual loan offer, be sure to do so within a short period of time — credit-scoring models usually take rate shopping into account, so multiple inquiries over a brief time period (typically 14 days) will generally be counted as just one inquiry.
Refinancing could help your credit score
A refinanced student loan might also help your credit score. For example, if you make on-time payments and are able to diversify your credit mix, you could see an improvement in your credit score over time.
If you decide to refinance your student loans, remember to shop around and consider as many lenders as you can to find the right loan for you. This is easy with Credible: You can compare your prequalified rates from multiple lenders in two minutes — without affecting your credit.
See Your Refinancing Options
Credible is 100% free!
Kat Tretina contributed to the reporting for this article.
