Student loans are a great aid for the students during the higher studies, but reports says they are meant to build positive credit history, provided the instalments are paid on time.
However, there are people who have instances in their life to prove, that student loans has badly affected their credit scores. And this complain is coming in immense to various financial institutions, as students are seeking for help or financial advices.
In the beginning, it is essential for the student loan owners to know that, they get federal loan for one year. But they are usually doled out in two or more payments. In many cases, the first payment is made when the school session begins, and the other during the spring. College likes to receive monthly payments, to avoid the falter of payments by mid-semester. However, the current norms state that federal loans are not going to permit that, they will allow one payment per semester.
How Many Student Loans Have You Taken?
Plenty of statistics comes into play when we talk about student loan debt. It is not very easy to track down the number of student loans that a borrower holds. It is found that a Bachelor Degree holder is having 6 to 8 loans and the figure might be something around – 16 for 4 years and 20 for 5 years.
The financial gurus have marked that after graduation, many of the borrowers prefers to consolidate their loans into a single federal loan and one private loan, and that brings down the number of open accounts to two.
Now the question comes- if the payments are treated as separate loans, can it hurt your credit scores? – and do remember that the payments against those loans are made on time.
We have referred to many credits scoring experts suggests that these complain are quite common for them. As the unhappy consumers reports very often, since the credit bureau considers the loan as separate, with different open dates and different scoring models. But the credit experts’ also says that they may not always be a bad thing.
It is fortunate to remark here, that the instalment balances of the student loan do not have the same scoring effect like the revolving balances. However, there are some areas where they negatively affect you. These include:
If the reports are for the first time, then each loan is taken as a new loan according to the scoring pattern, which comes with slight deduction in scores.
With each new payment appearing as a new loan, the borrowers’ age of the account will be low and result in a lower score, that the average age which is higher.
Multiple loans when squeezed into a single loan typically will not hurt your credit score. And the number of loans do not affect the credit scores normally, but when they are treated as separate loans it can affect them.
Another major problem that student loan borrower faces, is that their student loan are not reported in the accurate way. And for this credit scores are highly disrupted.
Make one thing clear, do make regular payments and keep track of all the loans, if you want to make your credit history remain unaffected.