The Impact of Student Loans on Your Credit Score
Having the right knowledge when it comes to student loans is very important to Americans these days due to the fact that 44.2 million of them have a student debt.
We will now discuss how a student loan will really affect your credit score.
This article will teach you on how much student loans make a difference in your score and the strategies that you should do to maintain that score as much as possible.
Understanding Credit Score
Who is responsible for calculating your credit score? How is it calculated?
FICO is the largest and the most popular company that issues credit scores; hence, most probably they are the ones that will issue your score too.
When it comes to how it is calculated, there are a lot of factors that are considered for that such as:
How Long a Credit History Is
What are Included in Your Credits
Amounts that Needs to be Payed
These components comprise 10%, 15%, 10%, 35% and 30% of your total credit score, respectively.
Your credit score is made through mathematical calculations. FICO will not actually show the exact calculations that they have computed.
Since there are several bureaus and companies that can provide you an information on how your credit is doing, you do not have to worry much about it.
Credit Karma is a website that will show you your credit score.
To see how well you performed, you can request a summary of your credit report once a year from credit bureaus such as TransUnion, Equifax and Experian.
A Credit Score Must be Maintained from Good to Exceptional
If you want to keep an excellent score, you need to fully understand what will make a good, very good and exceptional credit score.
Based on FICO standards, they are classified as follows:
A score is considered GOOD if it is between 670 and 739
If a score is between 740 and 799, it is already considered as a VERY GOOD score
If a score is between 800 and 850, it is already considered an EXCEPTIONAL score
Since we already have an idea on where the favorable scores are classified, the next thing that you should find out is how to maintain them. This can be done by simply paying your credits.
This implies that all the credits that have, including your student loan, should be payed as soon as they are due and it should be payed in full.
If you have a favorable score, it can definitely help you in obtaining more school loans, a home loan, rent an apartment, and even buy a car. People who stand between you and your goals will certainly examine your credit score closely, just like the other cases.