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does a student loan affect your credit score?
does a student loan affect your credit score?

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Does a Student Loan Affect Your Credit Score?

Many university graduates are worried that their student loans will hurt their credit score. Let's find out if this is true.
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An estimated 1.5 million students graduate with student loan debt every year. Plus, the average student loan debt is around £45,000, so for many, this is the largest loan they'll ever have to pay.

The good news is that student loans might not be as devastating as other types of debt.

Student's credit score

The lender will need to be certain that you can repay the debt if you ever wish to take out a mortgage or borrow money. Lenders in the UK examine your credit profile to see how you’re handling your credit commitments, whether you pay your accounts on time, how much credit you currently have, and how long accounts like loans and credit cards have been open.

Every person who has used any sort of financial credit is assigned a credit score. 

A high credit score demonstrates strong creditworthiness, whereas a low score indicates that you can't handle debt very well. It could be challenging to borrow money in the future if you have a low score because lenders normally favour higher scores.

Many university graduates are worried that their student loans will hurt their credit score as a result.

Do student loan repayments affect your credit?

Student loans typically don't affect your credit score. This is because they do not appear on your credit report.

Fortunately, this means that graduates from universities with substantial debt can still have a high credit rating.

It is important to note that mortgage lenders may still consider your loan when looking at your credit history and determining your ability to pay, as student loans affect your available credit. 

So, having a student loan may affect your ability to climb the property ladder.

However, as long as you satisfy the lender's other borrowing requirements, many mortgage lenders will still approve them. If a lender wants to know the status of your student loan, they will usually ask you directly.

Can student loan improve my credit report?

The most important aspect affecting your credit score is on-time payments.

Without this, you can't really make any improvement, so always making payments consistently on time will help you improve your credit. This includes student loans.

Having a student loan boosts your credit mix, which is helpful for your score if you've only used one sort of credit, like a credit card.

However, keep in mind that it is not worthwhile to borrow money you cannot afford just to have a variety of credit types on your profile.

On the other hand, a student loan that you took out, even with your parents as guarantors, will show up on your credit report, not theirs. However, they may need to undergo a credit search as they will be liable for the debt.

How does refinancing a student loan affect my credit?

Before refinancing student loans, you should always compare loan rates, especially since you can do so without hurting your credit. As mentioned, student loan refinancing won’t hurt your credit, but it may affect your chances of being approved for a mortgage in the future. 

Use the pre-approval option

You can prevent your credit report from receiving additional hard inquiries by getting estimated rates with a pre-approval process. By looking at pre-approval options first, you may get a rate estimate from several lenders that won't harm your credit.

Do credit scores affect new student loans?

Your credit score could be impacted by all of your student loans. However, you can obtain a student loan without having a good credit score.

Tuition fee loans

Credit checks are generally not necessary for the majority of student loans, including all tuition fee loans and maintenance loans. However, there are certain affordability requirements when applying for student loans, including your total household income. 

Private student loans

Private student loans need at least one borrower to have good credit in order to be approved. The lender will run a credit check on you to determine if you are eligible for the loan. 

Your likelihood of receiving a lower interest rate increases if you have a good credit score. Also, undergraduate students frequently require a joint loan or need parents to sign as guarantors on a loan, to be approved for private student loans.

There are also some new companies that offer student loans based on your future earning potential.

How do student loans affect mortgage applications?

Although an applicant's chances of getting approved will be worse if they have student debt compared to someone who doesn't, graduates typically earn more, offsetting some of the negatives.

Lenders will conduct affordability checks when evaluating mortgage applicants. This means that they will determine how much money is left over from a borrower's income after paying off their student loans to determine if they will be able to afford their mortgage payments.

Essentially, student loans affect your chances of being approved for a mortgage.

How can students improve their credit?

If you're worried about how your student loan may affect your future chances of being approved for a loan, it might be a good idea to secure a good credit score before you graduate.

Here are a few tips for improving your credit score as a student:

Stay away from buy now, pay later agreements

Buy now, pay later schemes are quite popular among students who may have to stick to a tight budget. But many students don't realise how these schemes can impact their credit.

If you use buy now, pay later schemes and make late payments, your credit score will suffer. It's best to avoid these schemes altogether. If you can't afford certain things, rather create a budget or reduce your spending so you can make cash purchases.

Make sure you're on the electoral roll

Getting on the electoral roll is one of the simplest ways to rapidly raise your credit score.

In reality, it will be more difficult for those who haven't registered to vote to borrow money in the future. Even though it might seem like a burden, registering to vote is a great way to raise your score and improve your chances of getting approved for credit in the future.

Use credit cards for small purchases

Consider applying for a credit card if you haven't already, as it's one of the simplest ways to improve your credit score and demonstrate to lenders that you are creditworthy.

Use your credit card wisely. Make small purchases with your credit card, like coffee or groceries, and repay any loans you receive as soon as possible.

You will raise your credit score each time you pay off your credit card balance in full before any interest is charged.

What if I skip a payment?

If you forget to make a payment or make a payment late, it will be marked on your credit file with one or more of the main credit reference agencies. Even if you’re just one day late, it will count as a late payment.

However, as soon as you miss a payment, lenders may impose late fees, and interest rate payments may quickly add up.

Your late payment, commonly known as a delinquent, will remain on your credit record for six years if your lender does report it.

Your credit will be harmed even more the longer your payment is past due. For instance, if you miss a payment, your student loan will default.

This will damage your credit more than a 30- or 90-day late payment would.

If you can't pay your student loan

Sometimes your finances can become a bit tight. If this happens, ask your lender if you can lower or temporarily pause your monthly payments. You can also enrol in forbearance or deferment to pause your monthly payments temporarily.

Keep in mind that your credit will be affected if you modify the terms of a private student loan, as it is an arrangement to pay and will be noted on your credit file.


A student loan will not have an impact on your credit report unless you've missed payments.

Paying bills on time may actually help your credit score because not having a credit score at all can be just as detrimental as having a negative one.

Getting an education is often worth taking on good debt but always be careful not to take on any debt that you won't be able to repay.

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