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The Up’s And Down’s Of Student Loans

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With the 2022 semester coming to a close and new graduates venturing out on their new journey, Student loans are an ever-present shadow looming over their credit report. In todays blog, we will go over the in’s and out’s of student loans and how they can affect your report in both positive and negative ways. 

The Positives 

1. Payment History 

When paid correctly, student loans can be an amazing way to build or supplement your credit score. Being a long-term trade line with constant payments, successful minimum payments will provide great positive payment history to your report. Payment history makes up roughly 35% of the FICO grading scale and impacts your final score heavily. The main difference that sets student loans apart from your monthly bills like your car insurance are that they do not report monthly (only when you go into collections or miss a payment) unlike other loans that report positively when you have positive payments.  

This is also fantastic for those fresh out of high school that don’t have a car or home loan to build credit or the ability to open a credit card due to their lack of credit history.. 

2. Building A Credit Mix 

There used to be a myth revolving around having many “diverse” accounts listed on your report would increase your credit score exponentially. The truth is only about 20% of your FICO score is comprised of new credit and different types of credit being utilized. Normally, just having two different revolving accounts and two loans are all you really need to continuously build your credit. This means that your student loan will help you fill out a portion of your credit mix while you continue to make positive payments! 

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The Negatives  

1. Late Payments on Loans 

If you fail to make payments on time and manage your account properly, you can easily tank your credit score with a simple mistake. Just as on time payments can help increase your credit score, late payments on your student loan can also harm them, sometimes up to 100 points. 

These negative remarks can remain listed on your report for up to seven years and are accessible to any lender. If you continue to miss payments to the account and they roll over continuously, your scores will continue to drop more and more with each one missed. With subsequent late payments and defaults, rebuilding your credit score afterwards can become a daunting and almost impossible task. Be vigilant of what is happening with your bills and other finances and be sure to communicate with your lender or institution when you begin falling behind. 

2. Defaulting  

As mentioned above, if your accounts are sent to collections, this can harm your scores exponentially. Often creditors will refuse to lend you any money unless you correct the collections and get back into good graces with the current lender. If you go and apply for a home loan or a vehicle loan and they see collections listed on the report, it can be extremely hard for them to find a lender who can justify lending to a high-risk account. 

This can be extraordinarily troublesome for young students who are attempting to start a life for themselves. If you are trying to open a credit card, no matter what the credit limit, lenders will not be keen on the idea of lending to someone who was unable to pay back money in the past 

Student loan forgiveness won't happen soon. Here's how the Covid-19  forbearance helped borrowers. - Vox

What Resources Are There? 

Having a degree is important by today’s standards and student loans are likely to come with them. Make sure you stay up to date on your payments, continue to establish positive credit and make sure to communicate with your lender if issues arise . 

Be sure to keep an eye on your credit report for any changes or reporting issues. With Credit Armor’s score tracker, monthly 3B credit report and disputing options, monitoring your credit score has never been easier. Feel free to message us with any questions at

A Note From The Author: The opinions you read here come from our editorial team. Our content is accurate to the best of our knowledge when we initially post it. 

Article by Joe Peters 

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