If you know someone who has a student loan, this is important information.
Facts About Student Loans No One May Have Told You
- A student loan paid on time every month is powerful for boosting your credit score — more influential than a credit card.
2. A student loan with late payments can devastate your credit score — more than lates on a credit card.
3. Student loans do not count in your credit usage ratio, which is good for you. (The scoring system adds up all your available credit and compares that to the amount of credit you’re using. This is your credit utilization ratio. Since new student loans have a high balance-to-credit ratio, it is good for you that student loans don’t factor in your overall ratio.)
4. Student loans can be sold from one company to another, which is fine, except when they don’t inform you in time for you to switch your automatic payments to the new company, and then your payment isn’t received, and they report you late. This means you must continue to monitor your student loan payments even after they’re on auto-pay.
5. Student loans usually have a low interest rate with a long payment term. This creates longevity for a positive pay history, and can be excellent for your credit score. This underscores the importance of always paying on time.
6. Student loans are not being forgiven or waived by the U.S. government. Don’t destroy your good credit by ignoring your student loans thinking they’re going to be soon wiped out. (Only the private school student loans that were found to be sold to student under fraudulent terms were forced to stop.)
7. The credit scoring system likes to see a variety of different types of credit, such as a credit card, an auto loan, a mortgage loan, and a student loan. So if you have a student loan, recognzie that it helps your credit on yet another level: credit mix.
8. If you find yourself unable to pay your student loan, call immediately and work out an arrangement, either a deferment or a reduced payment. Do not wait until after your payment is late! Do not shoot your credit all to pieces because you don’t know what to do. Call and ask for the department that helps with payment deferment.
9. If you have a co-signer on your studnet loan (which I hope you do not), and you are late, your innocent co-signer’s credit is equally penalized. Therefore, you must handle a financial hardship situation before going late! Have the courtesy of speaking with your co-signer as well as the student loan company. They co-signed in good faith, and you owe them that honesty and transparency.
If you know someone who has a student loan, please pass on this important information to them. Thank you.
