Do Student Loans Affect Credit Score?

do student loans affect credit score

Just like all debts that appear on your credit reports, student loans impact your credit scores depending upon you how well you manage them. Well-managed student loans may help you build a solid credit report and credit scores, while poorly managed student loans can have the opposite effect.

There are several variables with respect to student loans that are meaningful as they pertain to your credit scores. They are:

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Disbursement Method of Reporting

When you use student loans to finance all or part of your education, you may notice that multiple student loans appear on your credit reports. This happens because student loans are reported to the credit bureaus on a disbursement-by-disbursement basis, rather than as the aggregate of full loan amount.

If every semester you took out a new loan, a new debt was incurred and added to your credit reports. For example, if you took out one loan per semester to cover the standard four years of undergraduate studies, you will likely have eight separate student loans on your credit reports.

There’s a chance that multiple student loans could have a slightly negative impact on your credit scores due to the number of accounts with outstanding balances on your reports. Refinancing your loans into a new, single account when possible would rectify this problem. Having said that, this is a relatively minor problem as installment debt is not terribly influential to your scores.

Payment History Issues

Whether or not you pay your bills on time matters the most when your credit scores are calculated. If you keep your student loan payments on time, they can help you build positive credit as a positive payment history is good for your credit scores.

If you took out one loan per semester to cover the standard four years of undergraduate studies, you will likely have eight separate student loans on your credit reports.

Of course, late payments on student loans can be problematic. It’s a bad idea to be late on any credit obligation. However, being late on student loan payments could be disastrous.

Although you might make only one payment to your student loan servicer each month, you could have several accounts on your credit reports, as mentioned above. If you make a late payment to your student loan servicer, there’s a risk you could end up with multiple late payments on your reports because all of your accounts will be late, not just one.

When you default on student loans, the situation is worse. Unlike other types of negative credit information, the Fair Credit Reporting Act is silent on the subject of defaulted student loans and does not impose a maximum credit reporting period like it does for all other negative loan performance. Therefore, defaulted student loans can remain on your credit reports indefinitely.


When it comes to credit scores, the balances on your student loans aren’t a huge factor. Student loans are installment loans that feature fixed payments over fixed periods of time, like a mortgage or auto loan. From a scoring perspective, any impact your student loan balances may have is likely minimal.

If you’re trying to improve your credit scores, accelerating the payback of your student loans isn’t a great idea. The balances on these accounts didn’t impact your scores much in the first place. Therefore, paying the loans off isn’t going to have much impact either. This generally comes as a surprise to debtors who expect their scores to jump once their student loans have been paid off.

Paying down your credit card debt will always be the better move, where credit scores are concerned. Of course, there’s nothing wrong with paying off student loans early but don’t prioritize it before your more high-interest debts.