How Student Loans Affect Credit

If you've gone to college in the past decade, or have children who are attending, you probably have student loan debt of five-figures or more. But how do those big numbers actually affect your credit?

Student loan debt is treated like a mortgage or car loan a kind of debt known as an installment loan. This kind of loan has a set amount lent and fixed payments over a long period of time. Public or private, student loans are weighed exactly the same

While a large balance may seem grim it's actually not a bad thing. For installment loans like student loans the balance itself has no impact on your credit score - it's the payments that have the most weight. Your credit report, however, is another matter. If you have exceptionally high student loan debt that could weigh down your debt-to-income ratio making it more difficult to take out other major loans. But since most of us have this kind of debt looming on our report you shouldn't sweat it right now.

Just like every other kind of debt making payments on-time and in full is the most important thing. Missing one payment can cause a high score to drop considerably and many late payments can damage your credit for years and be difficult to repair. If you can't pay immediately or need a grace period that should be looked into when in the application process as it varies lender to lender.

Still, student loan debt is nothing to be afraid of in the long run. It's good for your credit score to have a mixture of kinds of debt on your record. Student loan repayment is also a long process which will establish a long running line of credit on your credit report and the older the line the better it is for your score.