The college application process is important for a myriad reasons, one of the most important being that it provides practice for something you’ll have to do for the rest of your life: figure out how you’ll pay for something. Upon graduation, young adults find themselves leasing cars, apartments, and houses, but the first of these large payments is your college tuition. Depending on your personal financial situation—and other factors, such as your school of choice and future plans—you will have to decide what tuition payment plan will work best for you.
Students and Student Loans
A majority of college students (66%, according to 2017 statistics) take out loans to help pay for college. With the constant up-and-down nature of the economy, several students turn to loan companies to ensure their payments will be consistent over their college career. Non-government companies provide loans to students based on their financial need and credit score.
The Importance of Credit Score
You’ll find that your credit score is relevant to many financial transactions, but for most students, the first time they’ll use it is for a student loan. Your credit score is, generally speaking, a rating compiled by different financial services that shows how likely you are to pay back loans on time. Loan companies will vet your history and decide if they think you’re responsible enough to get their funding. For most college students, this isn’t an issue at first, as a vast majority of undergrads have never taken out a line of credit before. Once the loan companies deduce your credit score and decide to lend you money, you’ll figure out a plan that works for you.
This process intimidates some, because your credit score is very important to your future and it seems like a risk to take out a loan at a young age. Simply put, you don’t have to worry about a student loan negatively affecting your credit score—as long as you pay it back on time. In fact, paying back your loan in full as quickly as possible will make your credit score go up, so this process can actually help you.
However, like many things in life, you should only enter this process if you’re completely confident that you’ll be able to complete it. Needless to say, if you fail to meet requirements of the program or don’t pay your loan back on time (or both), your rating will take a big hit and you’ll be in trouble come graduation when you attempt to take out another credit line. Your student loan payments can help or hurt you depending on your personal responsibility and plans for the future.
Protecting Your Credit Score
To avoid hurting your credit score, the best course of action to take, before applying for a loan, is to examine four things; your personal finances, your tuition rate, the rates & terms of your loan company, and your financial prospects upon graduation. Once you compare all four, it’s easy to come up with a plan so your student loans won’t hurt your credit score. In fact, you can easily end up raising your score if you go about everything correctly!
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