Does Taking Out A Student Loan Hurt Your Credit?

College is a surefire path to proper higher education, a personal and social life, personal identity and many other things that define a person. College also is, unfortunately, expensive. In this article let us learn about, Does Taking Out A Student Loan Hurt Your Credit?

Does Taking Out A Student Loan Hurt Your Credit?

This is why it does not matter how hard you work- you cannot float your college years with your waitress gig at the local diner or a part-time thing at your dad’s garage. Going to college, unless your parents have a lot of money to blow on you, means taking out a student loan.And like every other loan across the world, a student loan needs to be repaid.Taking out a loan is no joke. Take a moment and read that again.Student loans leave millions in debt and you’ll have to work your back off to make them go away. As far as its impact on your credit score is concerned, yes- a student loan can hurt your credit score, but only if you don’t repay your money.Taking out a studentloan is a big deal- what should you know before leaping? Here it is.

Does Taking Out A Student Loan Hurt Your Credit?

Before Taking Out a Student Loan

  • Ensure that you do adequate and thorough research on scholarships and grants. Remember, scholarships and grants don’t cost you a penny- it’s free! They’re awarded to students who show great academic promise. So if you think you fit the criteria, go ahead and apply for as many as you can find. If any of them come through, you’ve got a great deal!
  • When taking out a student loan, you need to remember that you won’t just be paying what you take out, but also a bit more in the form of interest. Interest charges start adding to your principal amount even when you’re in school- but that completely depends on the kind of loan you take. So do your research about this too- the time that your interest begins to accumulate can make a whole world of difference.

There are different kinds of student loans that you should know about. They are:

  1. Direct subsidized loans: This kind of loan is for those who need it. The government foots your interest payments until you get out of college.
  1. Direct unsubsidized loans: If you don’t qualify for a direct subsidized loan, you probably have to go for this. You’re responsible for all the interest accumulated during your time in school. 
  1. Direct PLUS loans: This loan needs you to get a credit check and is usually for graduates who want to continue studying or parents taking out loans on behalf of their children. 
  1. Direct consolidation forms: If you’re taking out more than one loan, you can have them consolidated so you only have to make a single payment every time.

Borrow as little as you can. If you get offered more than you need, say no! The more money you take, the more interest that gets built up too!Now that you know some basic pre-loan information, you can now go ahead and read about student loans and their effect on credit scores.

Student Loans and Credit Scores

A student loan affects you the same way any other loan does- if you pay on time, you’re good to go. If not, you’ll see your credit score take a hit.A credit score is a metric used to measure one’s reliability in paying back loans. This is a very important number for you in your adult life so it is important to make sure it is in check.

What you need to know is that a brief phase of forgetfulness is not going to ruin your credit. You only get a decreased credit score when your lender reports you on this account. Usually, a federal student loan lender takes 90 days after the due date to report you, whereas a private lender takes only 30 days. So even if you don’t hit the due date, make sure to pay within that time frame.

While reporting someone is done after giving sufficient time to make the payment, a late fee will be added to your dues, because…well, why else would you pay on time anyway?Remember, if your lender reports a payment- it stays on your credit score for seven years. Seven!

The longer you take to pay your dues, the worse the hit on your credit score is. If you don’t make a payment within 270 days of the due date, your loan will be considered to have gone into default. While paying late will hurt your credit score, paying on time can build it! Making consistent and on-time payments can surely build your credit score.

If your parent has taken out a loan on your behalf (this is usually the Parent PLUS loan), a timely payment from your end or a default will impact your parent’s credit score, not yours.But if you took out a loan with a co-signer, remember that the credit score of both the so-signers are affected by the payments you make.

If you’re also considering taking a new student loan to fund your education further, you don’t have to worry- you don’t need a great credit score to take out a student loan. Most federal student loans don’t require a credit score check, but if you are a graduate student or a parent taking out a loan on behalf of your child- usually a Federal PLUS loan- then you will be required to show a decent credit score.


Thus, taking out a student loan is one of the biggest responsibilities one can undertake. It takes years of hard work to pay it off and a whole load of responsibility towards your finances to achieve that. So, when you take one out, please be cognizant of the fact that you are undertaking a huge financial responsibility and you have to show some respect towards the money that you receive. When you borrow, you have to repay it- and most definitely since it can increase or decrease your credit score!So do pay diligently.