From finding an apartment to rent to qualifying for a car loan, your credit score contributes to a big portion of what is accessible to you throughout life. When your credit score is low, it can be challenging to access even basic things like a place to live. Conversely, when you have a high credit score, you are offered great housing options and lower interest rates on loans.

For those who already have student loan debt, the question becomes, how will my student loan debt affect my credit score? The answer is that it will vary depending on a few key factors. Check out the following guide to understanding the role student loan debt will have on your credit score.

Installment Loans Versus Revolving Credit

When it comes to your credit score, different kinds of debt will affect your score in different ways. A big differentiation to keep in mind is installment loans versus revolving credit. Your revolving credit includes things like credit cards and other lines of credit that you can utilize at will. This type of credit fluctuates as you use it. For example, one month you might have a lot more debt on your credit card than another because of recent purchases.

Installment loans, however, are for a set amount and their repayment is structured. This is the type of credit that student loans are considered. Each month, a specific amount is due and there is a specified time period in which your loans should be paid off.

Installment loans do not impact your credit score as greatly as your revolving credit. For example, if you were to rack up $20,000 in credit card debt, this would take a much bigger toll on your credit score than if you have $20,000 in installment loan debt. For this reason, having student loan debt is not something to be overly worried about in regards to your credit score.

Making Payments

One of the biggest ways your student loans will impact your credit score is based upon the payments you make each month. If you miss a payment or your student loans are delinquent, your credit can be hit hard. However, when you make your payments on time each month, you can actually improve your credit score.

Because the biggest impact your student loans will have on your credit score is connected to your payment history, it is critical that you make paying on time a priority. Scheduling automatic payments is an excellent way to ensure that your payments are never missed. Here at IonTuition, part of our student loan repayment benefit program includes the ability to easily manage student loans all in one place. Having payments take place automatically removes the worry of forgetting a payment and can ensure that you don’t damage your credit.

Your Ability To Acquire More Loans

Another way that your student loans can impact you is in regards to acquiring more loans. If you want to take out a personal loan, the amount of debt you currently have in comparison to your income will be taken into consideration. This debt to income ratio is an important component of determining eligibility for any loan.

In this way, having a large amount of student loan payments due each month, along with credit card payments, could mean you do not have a large enough income to qualify for another payment in the eyes of a bank. You can basically think of it like this. How much money do you have coming in each month? How much of that is accounted for by student loan payments? If you aren’t left with much over each month, you might not qualify for another loan. However, even if you have a lot of student loan debt, but you have small payments due each month and a good income, you might have an excellent chance of acquiring a personal loan.

Other Quick Tips For Improving Your Credit Score

The good news is that, ultimately, having a large amount of student loan debt will likely not have a negative impact on your credit score. As long as you are not missing payments each month, your student loans won’t affect your credit score hardly at all. It is a far better debt to hold than a massive amount of credit card debt.

If you are hoping to improve your current credit score, you can try a few of the following tactics. Remember, everyone’s credit will be affected differently and it is important that you seek the help of a financial advisor if you need specific advice for your unique situation.

  • Lower the amount of credit used: The more of your credit that is utilized, the bigger the impact on your credit score. Try to ensure that at least 60 percent of your credit lines are unused.
  • Handle outstanding debts: Do you owe money to a business? Are collection agencies after you? This can have a negative impact on your credit score. Try to pay outstanding debts to improve your credit over time.
  • Make payments on time: Whether it is your student loan payment or your utility bill, make sure you are paying everything on time. This will prevent your credit from being dinged due to late payments. It can also save you from costly late payment fees.

These are just a few ways you can work on improving your credit score. If you are struggling to meet credit requirements for rental properties or in order to qualify for a loan, it is worth taking the time to meet with a financial advisor to find out more. You might not even know why your credit score is low and a professional can help you assess this.

In conclusion, having student loans is not going to negatively impact your credit score unless you miss payments. Be sure that you stay on top of student loan repayment through automatic payments and by sticking to a detailed budget. If you are interested in learning more about how IonTuition aids businesses in offering student loan repayment assistance as a benefit, contact our team today.