For most young people, student loans are simply unavoidable. Currently, there is over $1.5 trillion in outstanding student loan debt in the U.S.
This number continues to grow each year as college costs increase and more students embark on their higher education journey.
The truth is that student loans can influence your credit, for better or worse depending on the circumstances–the key is knowing how to leverage your student loans to enhance your credit history. Fortunately, paying off your student loans can also work in your favor when it comes to getting help from a Dallas credit repair company.
Student loans can harm your credit score if you don’t pay them on time. Even a single missed payment can significantly decrease your score, and any missed or late payments can remain on your credit report for up to seven years.
Student loans offer young people an opportunity to show that they are responsible and can make regular payments on their debt; this is a primary component of anyone’s credit score. Another way student loans help your credit history is by boosting your average account age and expanding your account mix.
When you can show a long history of responsible credit use, such as keeping your student loans current, you are seen as a lower risk to lenders than an individual with a shorter credit history. Paying back student loans over many years increases your average account age, enabling you to demonstrate greater financial accountability.
Student loans offer a borrower the chance to make timely payments–any payments made against open lines of credit or loans are reported to the three primary credit bureaus and are part of your credit report. Whenever on-time payments land in your credit history, your credit score can go higher. Therefore, when you make regular payments on your student loans, your credit score could significantly improve.
In fact, payment history is one of the most critical and influential components of your credit score. It should go without saying that you should make all your scheduled payments on your student loans–or pay them early, just like you should pay credit card fees early.
If you have several kinds of credit in your name–multiple credit cards, personal loans, home loans, or student loans—you will be seen as someone who can manage different demands for their financial life. Successfully managing mixed credit helps reduce your perceived risk as a borrower and boost your credit score.
To keep your credit history going in the right direction, consider the following tips for managing your student loans.
Limiting what you owe is the best way to ensure that your student loans remain manageable and in good standing. While paying your educational expenses with loans may seem like a good idea, you should consider only using them for tuition, books, and school fees. Avoid using loans to pay for living expenses, such as rent and groceries.
Your payment track record will impact your credit score, no matter what the number currently is. The principle is simple: make regular payments on your loans and credit balances to boost your score; failing to pay what you owe could negatively impact your overall number.
If you are struggling to make payments on your student loans, reach out to your lender. It may be possible to defer payments, negotiate a new payment plan based on your income, or consolidate your loans under a single interest rate. Even private lenders usually work with borrowers to ensure they can make payments.
Wondering how much a credit repair lawyer costs? Take a look at our latest article.
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