5. Impact on Credit Score
Student loans can significantly impact your credit score, both positively and negatively. Managing your loans responsibly is key to maintaining a healthy credit profile.
Credit History
Making timely payments can boost your credit score, demonstrating responsible financial behavior. This positive payment history can help you qualify for other types of credit in the future, such as mortgages or car loans. Conversely, missed payments can negatively affect your credit, making it more difficult to obtain credit and higher interest rates on future loans.
Credit Utilization
High loan balances can impact your credit utilization ratio, which accounts for 30% of your credit score. This ratio compares your total debt to your total available credit. Remember this when borrowing, as high balances, can lower your credit score and impact your ability to obtain new credit.