How to Avoid Student Loans Negatively Affecting Your Credit Score

Avoid these mistakes that can result in your student loans negatively affecting your credit score

Flickr user This Year’s Love

Believe it or not, student loans can actually be beneficial! If managed properly, student loans can end up positively affecting your credit score and history—showing that you’re a responsible borrower. However, if mismanaged, student loans can end up negatively affecting your credit score. A negative credit score makes it harder for you to get loans or apply for larger purchases, such as a house, in the future. Here’s how to avoid that negativity:

Missing or Late Payments

First and foremost: pay on time. This is the easiest and most effective way to not only make repaying your student loans go as smoothly as possible, but also benefit your credit score.

Whether by setting up a loan calendar, put your loans on auto-debit, or consolidate multiple loans into one monthly payment, find a way to ensure you’re paying on time. Most federal student loans, and some private loans, have various repayment plans. Check out what repayment plans are open to you and decide which one will help you make on-time payments.

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Variable APR from 1.80% - 9.99% with auto-debit

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Student Loan Delinquency or Default

If you miss a payment, even by a day, you’re in student loan delinquency. And if you don’t pay for 270 days, your loan will default. You need to avoid these fates at all costs, as they’ll make repaying even more difficult, and hit your credit score hard.

If you do find yourself in delinquency or default, you need to get out of it ASAP.

Reasons to Avoid Bad Credit

Given that ‘bad’ is in the title, it’s a no-brainer that bad credit should be avoided. However, let’s go over a few reasons why to really hammer home why paying on time is important.

Good Credit = Lower Interest Rates

With a good credit score and proven credit history, loan lenders are more willing to give you a lower interest rate. This is great news if you plan on consolidating or refinancing your loans, or taking out a house or car payment in the future. Higher interest rates really add on to the total cost in the long run. Not to mention, interest adds up quickly and can overwhelm you.

Bad Credit Requires a Co-Signer

When you first took out student loans, you almost definitely needed a co-signer. However, with good credit a co-signer isn’t often needed, which is good news for you both. For you because you’ll probably get a lower interest rate out of it, and good for your potential co-signer because they won’t be responsible for repaying the loan if you can’t. (Co-signers can have their credit scores negatively affected if the borrower misses a payment too).

Bad Credit Costs More

Credit affects more than you might think. It’s not just student loans, after all, but any and all future loans, health and auto-insurance, and potentially even job prospects. College and student loans can be a great time to build your credit history for the better, so it’s worthwhile to put in the effort and stay on top of those payments.


Lender Rates (APR) Eligibility
Earnest company logo.
Variable APR: 1.74% - 5.64%*
Fixed APR: 2.44% - 5.79%*
Undergraduate and Graduate
Lendkey company logo.
Variable APR: 1.90% - 5.25%*
Fixed APR: 2.49% - 7.75%*
Undergraduate, Graduate, Parent PLUS
Credible company logo.
Variable APR: 1.80% - 9.99%*
Fixed APR: 2.15% - 9.99%*
Undergraduate and Graduate
Laurel road company logo.
Variable APR: 1.89% - 5.90%*
Fixed APR: 2.50% - 6.00%*
Undergraduate and Graduate
Commonbond company logo.
Variable APR: 1.98% - 7.04%*
Fixed APR: 2.59% - 6.94%*
Undergraduate, Graduate, Parent PLUS
Fixed APR: 2.44% - 6.22%*
Undergraduate, Graduate, Parent PLUS
VISIT ISL Education Lending
Variable APR: 1.87% – 6.52%**
Fixed APR: 2.30% – 5.96%**
Undergraduate, Graduate, Parent PLUS
VISIT Nelnet
Variable APR: 2.94% - 4.79%*
Fixed APR: 2.99% - 4.89%*
Undergraduate and Graduate
VISIT College Ave
Variable APR: 1.86% - 6.01%*
Fixed APR: 2.47% - 5.99%*
Undergraduate and Graduate, Parent PLUS

*APR includes a 0.25% interest rate reduction for enrollment in automatic payments.

**Interest rate reduction of .25% for automatically withdrawn payments from any designated bank account (“auto debit discount”). Auto debit discount applies when full payments (including both principal and interest) are automatically drafted from a bank account. The auto debit discount will continue to apply during periods of approved forbearance or deferment if the auto debit discount was in effect at the time of receiving the forbearance or deferment. Auto debit discount will remain on the account unless (1) the automatic deduction of payments is canceled or (2) there are three consecutive automatic deductions returned for insufficient funds at any time during the term of the loan.

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