6 Surprising Ways Your Student Loans Can Shape Your Credit Score

Wondering whether student loans affect your credit score? The short answer is yes. Understanding how federal and private student loans can help or hurt your credit is essential—whether you’re just starting out or have had student debt for years.

Below are six major ways student loans affect credit score and what each factor might mean for you.

Table of Contents

1. 1. Payment history 
2. 2. Credit mix
3. 3. Length of credit history
4. 4. Hard credit inquiries 
5. 5. Debt-to-income ratio
6. 6. Loan default consequences

1. Payment history (the biggest factor)

How much does payment history affect your credit score?

FICO and VantageScore are common scoring models lenders use to assess your application for financing. As you can see, payment history has a significant impact on your credit score:

• FICO: 35% of your overall score
• VantageScore: 41% of your overall score

As you can see, student loans affect your credit score through payment history. Just like any other loan, on-time payments can boost your credit, and late or missed payments may hurt it.

• Positive impact: Paying your student loan bill in full and on time every month builds a solid track record.

• Negative impact: Missing payments or paying late can damage your score in a hurry and leave a negative mark on your credit report.

Federal vs. private loan repayment:

• Federal student loans: No payments required as long as you’re enrolled at least half-time, plus a six-month grace period after graduation.
• Private student loans: Some lenders let you defer payments, but many offer specific in-school repayment options.

For instance, College Ave, one of our top-rated private lenders, allows you to choose full principal and interest, interest-only, or even no payments while in school.

2. Credit mix

Do student loans affect your credit score through credit mix? Yes—especially if you only have revolving accounts like credit cards.

• Installment loans: Student loans are installment debt, meaning you pay a set amount each month until the loan is paid off.
• Revolving debt: Credit cards let you borrow up to a certain limit repeatedly, as long as you pay down the balance.

Why it matters:

• FICO: Credit mix makes up about 10% of your total score.
• VantageScore: Credit age and mix combined make up 20% of your score.

Having student loans diversifies your credit profile and shows lenders you can handle different types of debt.

3. Length of credit history

How do student loans affect credit score in terms of credit age? They can help you establish a longer track record, which is good for your score.

• FICO: Your length of credit history is about 15% of your score.
• VantageScore: Credit age and mix combined is about 20% of your score.

Longer history = more trust

The earlier you open your student loans, the sooner they start building a payment timeline. A lengthy, positive history typically makes you look like a lower-risk borrower.

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Tip

Credit utilization (30% of your FICO score) applies to revolving credit (e.g., credit cards). Because student loans are installment loans, they don’t directly affect your credit utilization ratio.

4. Hard credit inquiries

Can applying for student loans affect your credit? Yes, if it triggers a hard credit inquiry.

• Federal student loans: Typically no hard credit pull (except Direct PLUS loans).
• Private student loans: Private lenders do perform hard inquiries, which can lower your score by a few points.

Reduce the impact:

• Prequalification: Some lenders, including Earnest, allow you to prequalify with a soft pull first, which doesn’t affect your score until you formally apply.
• Credible marketplace allows you to compare prequalified rates from multiple lenders without multiple hard inquiries.

Read More

What Credit Score Do You Need for Student Loans?

5. Debt-to-income ratio (DTI)

Student loans affect your credit indirectly. Your DTI can influence your ability to qualify for new credit, even though DTI isn’t calculated in your FICO or VantageScore.

• Definition: Your debt-to-income ratio is your total monthly debt divided by your gross monthly income.
• Impact on borrowing: A higher DTI could make it harder to get approved for mortgages or other large loans.

Example:

• Without student loan: $1,000 monthly debt / $4,000 income = 25% DTI
• Adding a $450 loan payment: $1,450 monthly debt / $4,000 income = 36% DTI

Even though it doesn’t directly affect your credit score, your student loan payment can raise your DTI and affect future borrowing decisions.

Read More

How Your DTI Affects Student Loan Refinancing

6. Loan default consequences

How do student loans affect credit score if you default? They can severely damage it, often for up to seven years on your report.

• Federal loans: Typically in default after 270 days of missed payments (delinquent after 90 days).
• Private loans: Default timelines vary by lender, but some label you in default after three missed monthly payments.

Serious ramifications:

• Credit drop. Late payments and defaults remain on your reports for seven years.
• Wage garnishment. Federal student loans can lead to garnished wages or tax refunds.
• Lawsuits. Private lenders may sue for the entire remaining balance.

The best strategy depends on your overall financial situation. For a healthy income, we might suggest using your credit cards for small monthly expenses and paying them off—or establishing a new card if you don’t have one.

Having different types of credit, combined with on-time payments, can boost your score. If you’re already stretched with a high DTI, focus on paying down your student loan first. That still helps your payment history but also streamlines your debt load.

Student loans can be a powerful tool to build—or harm—your credit score, depending on how you manage them. Making on-time payments, keeping a balanced credit mix, and monitoring your debt-to-income ratio are all steps in the right direction.

Whether you’re new to borrowing or already juggling multiple loans, a proactive approach to repayment can lead to strong credit and better financial opportunities down the road. Ultimately, understanding these six factors ensures you’re not just paying off student debt—but also setting yourself up for long-term success.