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How Student Loans Affect Your Credit Report

Posted: March 08, 2022

With the average student loan amount at the end of 2021, being $38,792, many renters are now wondering how their loans will affect their credit score.

Student loans will show up on your tenant credit report as a tradeline and will be in a category called installment loans. Having them on your credit report adds to your credit mix which makes up 10% of your score calculation.  This is an advantage if you have different kinds of loan products as it shows you can manage different kinds of debt.

Landlords and property managers will see the date the loan started, your loan balance, monthly payment towards the loan, and if you have any late payments.  Late payments will be categorized into day 30, 60, and day 90. Payment history is the most important factor in determining your credit score, accounting for 35% of its calculation.  If you end up falling behind on your payment or defaulting on your student loan, that’s where it can affect your credit score for up to 7 years.

The standard life of a student loan is 10 years with some lenders allowing you to extend or defer payments.  If you think that you will be late on upcoming payments it’s best to contact the lender and ask for a deferral.  A deferred payment does not affect your FICO score, unlike a late payment, which will incur a late fee and affect your credit score. Also, deferring payments on certain loans stops the accrual of interest until the deferment period is over, while making late payments allows interest to accrue on top of the unpaid interest and the principal.

A well-managed student loan can help a new graduate establish a great credit history. Since your FICO score is based on different factors, including payment history, length of credit history, and debt to credit ratio, paying your loan responsibly over the length of the loan will increase your FICO score a little more each year. If you choose to take a student loan, treat it the same way you would treat any other loan and take no more than you need, and pay on time every month.