STUDENT LOANS: THE ONE THING NOBODY KNOWS
Student loans are something that a large portion of today's population deal with. We understand that they can be outrageous and create incredible burdens. Student loans are specialty loans designed to help students pay for post secondary education (fees, tuition, living expenses, books, etc.). These loans are treated the same as other installment loans. Nonetheless, the average student loan debt sits at around $30,000 or more. Having $25,000-$50,000+ in student loans is a massive commitment and burden for many to bear.
Here’s the thing, you have to have debt to income ratios to determine your credit worth. So debt isn’t necessarily a bad thing as long as you can afford it. The simple fact is, most people can’t afford their debt which is why they can’t make their payments on time to begin with. What most people don’t tell you about student loans is that in order for student loans to have a positive impact on your credit score you MUST begin paying on your loan the moment you take it out. You CANNOT defer the student loan or else it will become a negative item.
However, if you are a part of the tiny percentage of people who begin paying on their loans while they are in school - it can have a great benefit! The length of your credit history accounts for 15% of your credit score. Since most student loans have long repayment times, this strengthens and builds your history over time. The longer your credit history the better!
Student loans can be great for creating strong repayment habits, and having a positive payment history. Your payment history (the degree to which you pay your bills on time) makes up 30% of your credit score. This is one of the biggest attributing factors to your credit score. Pay your bills and student loan installments ON TIME!
IMPORTANT REMINDER: If you do not complete your payments in full and on time they have the potential to damage your credit score immensely. So, set automatic payments, set reminders, do whatever you have to to make sure all of your payments are made on time and in full.
Remember this:
Student Loans have to be paid on the moment you take them out in order for them to have a positive effect on your credit (that means you are paying loans off while you are in school)
Minimum payment is okay during this time (but minimum payments on student loans means you'll likely pay on them for the duration of your life - so come up with a plan to no longer make minimum payments
The length of your credit history makes up 15% of your credit report
Average student loan cost is upwards of $30,000
Quick Breakdown of the Numbers
Credit history = 15% of your credit score
Account mix = 10% of your credit score
Payment history = 30% of your credit score
If you ever have questions, contact us - your expert consultants.
—
Solutions Team
