Do student loans affect my credit score?

Like any type of debt, student loans do affect your credit score. But the impact could be either positive or negative, depending on how you manage your debt. Managing your monthly payments responsibly can boost your overall score while late or missed payments can cause it to drop.

If you’re a prospective borrower, you should also know that your credit score can influence your ability to qualify for a private student loan as well as the interest rate you receive. Applying for private student loans and certain federal loans also involves a hard credit pull, which can cause a slight dip in your credit score. 

Here’s everything you need to know about student loans, the impact they have on your credit score, and vice-versa. 

How your credit score is calculated

The FICO scoring model is commonly used to calculate your credit score, giving you a score that ranges from 300 to 850. FICO evaluates several factors when determining your score, and each holds a different weight. These factors include your payment history, the amount of debt you owe, the length of your credit history, your mix of credit, and new credit accounts opened. Here’s how your FICO score breaks down:

• Your payment history: This is the most important element in both models, and can have a significant impact on your credit rating. It looks at how responsible you've been with paying your bills on time in the past.
• How much debt you owe: This looks at several factors, including how much you currently owe on all your debts. It can also include your credit utilization, which is how much of your available credit you use each month. If you regularly charge up to your credit limit, it’s an indicator that you may be living beyond your means.
• Length of your credit history: This reviews the average age of your credit accounts, along with your oldest and newest accounts. Having a longer borrowing history helps improve your credit score.
• Mix of credit: Lenders like to see that you can manage different kinds of credit, such as revolving accounts (like credit cards) and installment loans (like student debt). It’s best to have a combination of different types of accounts.
• New credit accounts: When you apply for new credit, a hard inquiry goes on your record. Too many hard inquiries in a short time makes lenders nervous and can hurt your score.

How student loans can affect your credit score

Positive effects of student loans on credit 

Here are some of the positive impacts student loans could have on your credit score: 

• They can help you build a credit history: Student loans are often the first debt young people take on. Plus, most federal student loans don’t require a credit check, making it easy for students to qualify. Once you have student loans, they’ll show up on your credit report and can help improve the length of your credit history.
• They can create a positive payment record: Your student loan payments are reported to the credit agencies, and paying your debt on time and in full each month can help you develop a positive payment history. This is the most important factor in your credit score, and can have a big impact.
• They can diversify your mix of credit: Student debt is a form of installment loan, which has a predictable monthly payment. This is different from credit cards, which can have varying payment amounts each month. By taking on student debt, you can help improve your credit mix and show your ability to manage your money wisely.

Negative effects of student loans on credit 

Here are some of the potential negative impacts your student debt could have on your credit: 

• Credit inquiries can cause a slight dip in credit: Parents and graduates applying for direct PLUS loans undergo a credit check that looks for adverse credit, although your actual score isn’t considered. Private student loan applications also require a hard credit inquiry. To minimize the impact of multiple hard inquiries, try to submit all of your student loans applications within a 2 week time frame, since FICO treats multiple inquiries for the same type of credit as one single inquiry. 
• Late or missed payments hurt your credit history: Late or missed payments will show up on your credit record and can have a profoundly negative effect on your credit score. When you skip a payment, your loan becomes delinquent. If a federal student loan payment is missed for 90 days or more, your loan servicer will report the delinquency to the three major credit bureaus, putting your loans at risk of default. 
• Default can be devastating: If you miss payments for several months, your loan can enter into default. This will show up on your credit record and remain there for seven years. Like bankruptcies and foreclosures, defaulting on student loans can have a serious negative impact on your credit history and take years to recover from.

What credit score is needed for student loans? 

Student loans can have positive or negative impacts on credit, but they also determine whether you can qualify for certain student loans in the first place. Credit score requirements for federal student loans exist for only certain types of loans, while credit score requirements for private lenders can vary. Here’s what to know: 

• Federal student loans: Most federal student loans don’t have credit score requirements. However, grad PLUS loans and parent PLUS loans do require a credit inquiry that checks for adverse credit. 
• Private student loans: Credit score requirements vary by lender, but in most cases, you or a cosigner will need to have a credit score in the mid-to-high 600s to get approved for a loan. A higher score also means you’ll qualify for a lower interest rate. 

Compare private student loan minimum credit score requirements by lender: 

Related: Best Student Loans for Bad Credit of 2024

How does refinancing student loans affect my credit?

When you refinance student loans, you must apply for a new loan. This can result in a hard inquiry on your credit report which causes a slight dip in your credit score. You’ll also have a new loan on your credit record when you refinance, which can shorten the length of your average credit age. These two factors can have a small, temporarily negative impact on your credit.

However, if refinancing makes loan payment easier and more affordable, you can develop a positive payment history and potentially pay off your balance more quickly, which could improve your credit utilization and debt-to-income ratio.

Related: Can I refinance student loans with bad credit?

Tips to improve your credit score

You can take several steps to ensure your student loans help — instead of hurt — your credit score. To maintain good credit, follow these tips:

• Always pay on time: Making your payments on time will help you develop a positive payment record, which is a major benefit to your score due to the weight placed on this category.
• Consider an income-driven payment plan: If you have federal student loans, income-driven repayment (IDR) plans cap payments at a percentage of income, making them more affordable. Since they lower your monthly payment, this can also improve your debt-to-income ratio — another factor lenders use, along with your credit score, in determining your eligibility. You can compare federal repayment options using Federal Student Aid’s loan simulator.
• Monitor your credit report for errors: Mistakes can be made on your credit record. Lenders could report payment history inaccurately, or information could show up on your report that isn't even yours. Monitoring your credit can help you to spot these mistakes and dispute them, so they don't unfairly drag down your score.
• Research loan forgiveness: If you can qualify for student loan forgiveness, your loans will be reported as paid once the debt is discharged. This can help your credit history by showing a fully paid-off account.
• Consider refinancing or consolidating student loans: Both of these options can reduce your monthly payment so it’s easier to make payments on time and avoid default. You’ll get a new inquiry on your credit record when refinancing, though, so be aware this could cause a slight short-term decline. However, if payoff is easier with these options, you might also lower your balance faster, which can help with your credit utilization.

Student loans and credit score FAQ

Do my student loans affect my cosigner's credit?

Your student loans will influence your cosigner's credit. The loans will be displayed on their credit record as one of their accounts, even if you are the primary borrower. If you’re late making payments or default on your debt, this will damage your cosigner's credit along with your own.

How does student loan forgiveness affect my credit score?

If your student loans are forgiven, this credit account will show as closed and paid in full on your credit record. This could have a positive impact because you will have a lower credit balance and credit utilization ratio.

However, your depth of credit or the mix of different kinds of credit you have could be damaged, because you will no longer have this installment loan to pay. Any negative impact on your credit is typically small and short-term.

Does deferment or forbearance affect my credit?

Your account will remain in good standing while you are in a period of student loan forbearance or deferment, so there shouldn't be a negative impact on your credit record. Forbearance or deferment are far better options than missing payments or defaulting if you cannot pay your loans at the moment for any reason.

However, interest will typically continue to accrue on your loans while they’re paused. While this won’t hurt your credit, it’s generally best to use this as a short-term solution to keep your balance from growing too much.