Does Student Loan Debt Affect Your Credit Score and Reporting

The issue of student loan forgiveness has been making headlines for a long. It has become a hotly debated issue amongst detractors and proponents of the concept. However, irrespective of one’s position, there is one pertinent aspect to take into consideration; whether student loan debt forgiveness can impact one’s credit scores and reports. 

Student loans subject to the same reporting as installment loans 

Student loans are the same as other loans, even though some differences exist. They are installment loans, and you have to make monthly payments as you could a mortgage or car loan. However, when reporting to bureaus, students considerably differ from other loans. 

It is important to note that student loans are several loans taken over several semesters, and reporting happens when they are disbursed. Therefore this implies that the loan servicer will furnish credit reporting agencies with the number of loans you take independently. For instance, taking five loans means five installment loans will appear on the credit report. 

According to the 2009 CARD Act, individuals below 21 cannot get credit cards unless they have a job or co-signer. As a result, this makes college students wait years before they can start building credit. Interestingly a student loan can replace a credit card’s credit-building aspects. As a result, they can incur student loan debt that will be reported to credit reporting agencies. 

How student loans affect credit score 

Since credit reporting agencies receive information on student loans, credit scoring systems like FICO’s credit scores often take them into consideration. There is no special treatment of student loans on the scoring system, considering they have the same attributes as installment loans. 

A student loan has an account status, opening date, and payment history, which are aspects credit scoring models consider. Therefore based on how well you service your student loans, they can build or damage your credit score. 

It is important to note that debt related to student loans is insignificant to your credit scores, and you could still have a good score even with a large installment debt. 

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