The season of graduation is upon us, which means it’s time to think about student loans! While this isn’t necessarily an exciting topic college grads like to talk about, it’s important to understand how student loans affect your credit score:
- Establishing Credit. Student loans are a great way to establish credit early. Some college students may not be eligible for credit cards and student loans are considered a good type of credit.
- Paying Off Your Loans. While paying off your student loans is good, if you don’t have other types of installment credit such as a car loan or mortgage, your credit mix will change. You won’t have any history to show, which can affect your credit score.
- Missing Payments. Missing payments on your student loans or any loans for that matter, will hurt your credit score. Make reminders for yourself, whether it is a calendar with appointments, alerts on your phone or a simple post-it note.
- Debt-to-Income Ratio. Your debt-to-income ratio is your monthly debt payment divided by your gross monthly income. If you pay a high amount on your student loans and your monthly income is lower, this can affect your credit score.
Whether you’re getting ready to go off to school, you’re about to graduate, it’s good to be educated about student loans and how they affect your credit score. Have other tips on student loans? Share them below.