If you missed a Student Loan payment, the delinquency remains on your credit report for 7 years. Therefore, it is very important to make regular monthly payments in order to avoid negative consequences.
Credit Score And Student Loan
If you borrowed money to pay for your college, chances that you want to know how this affects your credit score are quite high. Of course, a credit account is an important part of our life, so it is important to keep track of it in order to avoid additional problems in the future. The credit score affects whether you are approved for your next credit card, Mortgage, or Car Loan. Thus, lenders use the credit account to decide whether and on what terms they will approve you.
Do Student Loans Affect Your Credit?
The short answer is yes. You should be aware that a Student Loan affects your credit report and credit score just like any other loan. You should also know that account information such as the loan amount, payment history, monthly payment amount, and so on are taken into account when calculating the credit rating.
So, as stated, your Student Loan amount and payment history will be included in your credit report. Making payments on time can help you maintain a positive credit score and even improve it. On the contrary, non-payment can damage your credit and even worsen it.
Important! It is necessary to pay attention to your credit history as it can help you get better interest rates in the future. If you understand that you will not be able to make payments, you need to contact your credit company to work out a payment plan.
How Do Student Loans Affect Credit Score
Since the answer to the question “can student loan affect your credit score” is yes, it’s time to find out exactly what impact it has.
You probably know that the most important factor in a credit account is your payment history. Thus, you should know that if you missed a payment, the delinquency remains in your credit report for 7 years.
When it comes to Student Loans, it is common for companies to provide an account for each enrollment period. Therefore, it is important to understand that as a result of just one missed payment, there will be multiple delinquencies on your credit report. That is why it is very important to make every payment on time.
What Happens If You Default On A Student Loan?
As you probably know, Federal Student Loans are most often insured or guaranteed by the government. So, if you default on a federal loan, the lender can file a claim with the government to recover the amount due. Thus, the government usually opens a new account to collect the balance on the account.
If you have a private student loan, then you should know that it is not supported by the government. Thus, if you are default on a loan, then the account may be sold to a collection agency.
What Can I Do If I Know I Can’t Pay My Student Loan Debt?
If you know you will not be able to pay off your Student Loan debt, then you will first need to contact your lender to discuss your options. Important! It is best to do this before your payment becomes overdue. The lender will most likely be able to offer you several alternatives, such as:
- Apply to change the payment plan (if you have a private loan)
- Sign up for an income-driven repayment plan if you have federal loans
- Enroll in deferment to temporarily suspend your monthly payments
Important! You should pay attention to the fact that changing the terms of the loan will not damage your credit history. Thus, as long as you pay off the debt in accordance with the agreement, your loan will not suffer.