How Can Student Loans Affect Your Credit?

A college student studying in living room, spending time with her roommate who is laying on the couch using her phone.
Dear Experian,

My student loans are affecting my credit. Why?


Dear NCB,

Student loans are a debt obligation just like any other. When reviewing a credit application, lenders like to know how much you already owe to others so they can determine if you will be able to repay any new debt.

Once you open a student loan, the lender may begin reporting the account to the major credit reporting companies—Experian, TransUnion and Equifax. The account's entry will indicate the payment status of the student loans, whether in deferment or in repayment, as well as your payment history.

Student Loans Can Help or Hurt Your Credit

You didn't mention how the student loans are affecting your credit. If you are already in repayment and have made late payments, the delinquencies will appear in the history of the accounts and can affect credit scores and lending decisions. Missing student loan payments can affect your credit the same way it would with any other type of debt. Your payment history is the most important factor in credit scores, and even one late payment can hurt you. On the other hand, if you've always made your payments on time, your student loans can help you build a strong credit history and show lenders you know how to manage your debts responsibly.

Even if your loans are not yet in repayment, or there are no late payments on the accounts, the amount of student loan debt you owe might affect your credit scores or your ability to qualify for additional credit. Lenders and credit scoring systems consider your student loans as debts that you owe, even if the debts are still in deferment.

The amount you owe on student loans will reduce the funds you have available to repay any other debts. This puts pressure on your ability to manage any unforeseen financial challenges and increases the risk that you'll fail to pay your debts.

How Can I Improve My Credit?

If you are looking for ways to improve your credit scores, a good first step is to order your free credit report and free credit score. Your credit score will come with a list of the risk factors that are negatively impacting you the most. These factors give you insight into what changes you can make to increase your scores. In the meantime, here are some things anyone can do to begin improving their scores:

  • Bring current any past-due accounts. If you have any accounts on your report that are currently past due, bringing them current is the first step to helping your scores. Once current, take special care to make sure all payments are made on time going forward.
  • Reduce balances on any credit card accounts. Your credit utilization rate is the second most important factor in your scores, right behind payment history. The lower your utilization rate, the better for your scores; below 10% is considered best.
  • Pay off any outstanding collection accounts. Paying off a collection account doesn't automatically remove it from your report, but it could still improve your scores right away. That's because many credit score models will exclude a collection from the score calculation once it's paid in full. Potential lenders also tend to view a paid-off collection account more favorably than one with an outstanding balance.
  • Sign up for Experian Boost®ø. Experian offers a free service that allows you to add your on-time payments on your utility, cellphone and streaming services to your credit report. These positive payments can help boost your credit scores right away.

Thanks for asking.

Jennifer White, Consumer Education Specialist