How Do School Loans Show up on Your Credit Report?

Student loan application
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Yes, your student loans appear on your credit report and are factored into your credit rating, just like any other loans. That means they can provide a positive effect on your credit rating if you make payments promptly, or a negative impact if you miss payments or go into default.

If you take out a reasonable amount of student loan debt and make responsible payments on it after graduation, your credit report will reflect that you are a conscientious borrower who is good at financial management. This could make you look appealing when you need to borrow more money in the future.

On the other hand, failure to pay your student loans on time, letting your student loans fall into collections, or defaulting on student loans will also go on your credit report and will definitely negatively impact your credit score.

Situations When School Loans Show up on Your Credit Report

It is crucial that you keep your student loan in good standing since it can come back to haunt you when you try to buy your next car, your first home, or even when you apply for some jobs. Here are some other points to keep in mind about the way student loans can impact your credit:

Shopping for Private Student Loans Can Affect Your Credit

Applying for federal student loans doesn’t show up on your credit report until you actually take out a loan. But if you still need additional funds beyond federal student loans to pay for your college expenses, you may decide to shop around for private student loans. These applications likely will show up on your credit, and may look bad if it seems like you're applying to too many lenders.

Handle this by completing your research first, before making any actual applications that will probably get reported.

Loans Appear on Your Credit Report Even While Deferred

For the record, your student loans will usually show on your credit report while you are still in college and still technically in deferment. However, this typically does not have a dramatic effect on your ability to get non-educational loans since many lenders are more interested in your current monthly payment obligations, which are zero while still in school, as opposed to your actual loan balances.

What Can You Do If You Can't Pay Your Loans?

It's not unusual to have problems repaying your loans once you're out of college and have entered the workforce (or are trying to do so). Here are some tactics that may help you deal with high student loan balances:

Deferments Can Help If You Can't Make Your Student Loan Payments

Review the federal student loan payment options carefully, as they can be changed to reflect your earning capability after graduation. Depending on your personal situation, you may be eligible for some type of temporary deferment or forbearance to help lighten the load.

A loan forbearance will allow you to stop making payments for a certain amount of time, or to reduce payments temporarily. A deferment or forbearance doesn’t hurt your credit score since that is considered as being “paid as agreed.” You may also want to take advantage of one of the income-based student loan repayment options which are more sensitive to the amount of money you have available.

Loan Consolidation May Help

If you took out both federal and private student loans during your college career, it can get confusing for you and may look messy on your credit report. You also may be more apt to miss a payment, just because your various loans have different payment due dates and payment amounts. It may be helpful to use a Direct Consolidation Loan for your federal student loans so that you will only have one monthly payment to make.

When Do School Loans Show up Negatively on Your Credit?

Ignoring your loans doesn’t improve your situation. If you do experience financial difficulty, trying to deal with student loan payments can feel like another burden on your shoulders. It might seem like it would be easier to crawl into a hole and hide, but that really just ends up making things worse. Late payments start showing up on your credit report and restricting your ability to make alternative payment arrangements.

If you default completely on your federal student loans, that sets off a whole string of adverse actions and makes your life even more miserable. A student loan default could remain on your credit report for seven years. The government can garnish your pay and also withhold any federal income tax refund you might have been counting on to get out of this situation.