When It Comes to Student Loans and Credit Scores, Know 10 Things (Part 2), by 720 Credit Score
In my last post, I told you the first five things you should know about student loans and credit scores. Here are five more…
Student Loans and Credit, Fact #6:
About 30 percent of your credit score is determined by your outstanding debt: the ratio of how much you owe versus how much you have paid. The more you have paid and the less you owe, the better your score. If your payments are being deferred until you have graduated, or if you have deferred payments for another reason, the ratio will not be in your favor, and your score might drop. However, it will start to increase after about six months of timely payments.
Student Loans and Credit, Fact #7
Once you begin repaying your loan, never miss a payment without first asking the lender for a forbearance or deferment. Here’s something you might not know about student loans and credit: 35 percent of your total credit score will be drawn from your payment history on credit cards and loans.
Student Loans and Credit, Fact #8:
Keep in touch with your lender. If you are struggling with your payments, never wait until the lender approaches you or until a delinquency notice is logged on your record. Instead, initiate communication with your lender. Talk about forbearance or student loan consolidation.
Student Loans and Credit, Fact #9:
Making regular payments on your student loans is a great way for young adults to begin building their credit score, setting the foundation for better loan terms and lower interest rates on future loans, and saving bundles over the course of a lifetime. But this isn’t enough. As you move on after school, you should try to incorporate different types of credit into your finances while keeping current on your payments. The mix of credit you have makes up 10 percent of your score. The credit scoring bureaus want to see that you can handle a variety of types of loans—from credit cards to student loans to car loans.
Student Loans and Credit, Fact #10:
Student loans can almost never be discharged during bankruptcy. That said, if you are ever struggling to pay your student loan debt, you can and should meet with a student loan attorney because some people qualify for income-based payments, others qualify for total forgiveness, and many people working with an attorney can shave a couple hundred dollars a month off their payments. Watch this video for more information.