How do student loans affect credit?
For many people just out of college, student loans are a gigantic weight around their neck. 44.2 million Americans have student loan debt to pay back, and overall they owe $1.44 trillion. These huge numbers show that student loans are just a part of getting a degree for most of America. Your student loans affect many aspects of your life, like your credit score.
When you first enter “the real world” after college, it is likely that you don’t have a credit score, which can make it hard to apply for a car loan or a credit card. However, if you have student loans and make your payment every month, you can begin to build credit. If you have student loans and a credit card, that can be even better for your credit score. Having different types of debt is referred to as your credit mix. 45% of your credit score is made up of your credit mix and your payment history.
[Read More: Can I Get a Car Loan with No Credit?]
How long does it take to pay off student loans?
It is expected that borrowers pay off their loans in about 10 years. However, the average person with student loans takes 21 years to pay off the loan for a bachelor’s degree. While having a monthly payment for that long is daunting, it can be good for your credit score. If you are making your payment every month for 10 to 20 years, you’ll have a long-standing history of reliable payment. Your credit history accounts for 15% of your credit score and having established credit history can positively affect your score.
Of course, there are aspects of loan repayment that can hurt your credit score, but for the most part, your student loans can positively influence your credit. Visit our blog to learn more about your credit score or contact us at Broadway Auto Credit for information on applying for an auto loan.