How do student loans affect my credit score?

There is nothing special or unique about a student loan as a type of loan in the calculation of your credit score.

Student loans are considered by lenders as a form of installment credit. Other examples of installment credit are loans provided by lenders for:

  • cars and trucks
  • major home appliances
  • boats and other water sports vehicles
  • motorcycles, motorbikes, and off-road motorized vehicles

Most installment loans are characterized by

  1. a steady monthly payment amount which includes both principal reduction and interest cost
  2. a loan term length of 12 months to 84 months depending upon the cost of the item purchased and the amount, if any, of the down-payment you make

There are five major categories of loans that appear on a credit report

  • installment loans
  • mortgages
  • general purpose cards such as Visa, MasterCard, Discover, and American Express
  • retail cards such as dedicated store cards and gas charge cards
  • revolving lines of credit, some of which are secured by real estate or other assets and also unsecured revolving lines of credit

Student Loans are a type of installment credit

Lenders like to see evidence that borrowers are able to manage different types of credit. Having a variety of credit types reflects good credit management skills on your part and may result in stronger credit scores as long as payments are current on all accounts. If you have a student loan, make sure you are making all payments timely. Combining a student loan or other installment loan with at least one general purpose credit card and one retail card will result in a good balance of types of credit. If you are paying all of them on or before their payment due dates, and you are keeping your revolving credit balances to less than 30% of your credit lines, you will develop and maintain a strong credit score.