Do Student Loans Affect My Credit Score?

Grace Lemire
Grace Lemire

Grace Lemire is a freelance writer and editor with over five years of experience in the personal finance industry. She has been featured on a variety of publications, including NPR, CNN, FinanceBuzz, Dollar Geek, Pangea, and True Finance. Her work focuses on the intersection of personal finance and technology. In 2023, Grace was nominated for the Best Personal Finance Advice award in’s FinTok Awards.

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September 7, 2022

If you’ve borrowed a student loan to fund your college education, you may be curious about the impact it could have on your credit score. 

Like other installment loans, student loans can both help and hurt your credit. If you’re diligent about making payments on time, it may give your score a boost. If you’re missing payments left and right, however, your score could take a serious hit.

To prevent any unintended credit mishaps, you should understand how your credit score is calculated and how your score can shift when borrowing a student loan.

Here’s what you need to know about how student loans affect your credit score.

How Your Credit Score is Calculated

To understand how student loans affect your credit score, you should know how your credit score is calculated to begin with. While there are a variety of credit scoring models, FICO and VantageScore are the two most commonly used by lenders. Here’s how each are calculated:

FICO Score Calculations

Payment History (35%): Your payment history takes into account whether you’ve paid past credit accounts on time. If your track record is spotted with missed or late payments, your score will suffer in this category.

Amounts Owed (30%): Amounts owed, also commonly referred to as credit utilization, is the amount of debt you owe in comparison to the total line of credit you have. While having a high total line of available credit isn’t a bad thing, using a large portion of it may indicate to lenders that you’re overextending yourself financially.

Length of Credit History (15%): The longer you’ve been able to effectively manage lines of credit, the better. The length of your credit history is evaluated based on how long your credit accounts have been established, taking into account your oldest and most recent account, plus an average age of all of your accounts.

Credit Mix (10%): An ability to effectively manage a diverse set of credit accounts can be an indicator that you’re financially responsible. So, your FICO score will take into account the mix of installment loans (like student loans), credit cards, mortgage loans, and retail accounts you have.

New Credit (10%): Opening multiple credit accounts in a short period of time raises a red flag to creditors and lenders. In their eyes, it could be a sign of an inability to manage your finances properly, or a desperate need to put expenses on a line of credit. Minimizing the number of new credit accounts you open within any given period of time can help boost your score in this category.

VantageScore 4.0 Calculations

Payment History (41%): Like FICO scores, VantageScore 4.0 places high importance on your payment history, or whether you’ve been able to make on-time payments in the past.

Utilization (20%): Utilization represents how much of your overall available credit you are currently using. The lower this ratio, the better.

Age/Mix of Credit (20%): VantageScore’s “Age/Mix of Credit” category is essentially a mix of FICO’s “Length of Credit History” and “Credit Mix” categories. It evaluates how reliable you may be by using the age of your credit accounts and the mix of credit lines you use as determining factors.

New Credit (11%): VantageScore’s “New Credit” category is the same as FICO’s, except it represents a bit more of your overall score.

Balance (6%): Balance represents how much debt you have in total. In the VantageScore 4.0 model, the larger the balance, the more it will hurt your credit score.

Available Credit (2%): Available credit represents the amount of credit you have available on revolving accounts, such as credit cards. The more available credit you have, the higher you’re likely to score in this category.

Note that VantageScore updates its scoring model from time to time. VantageScore 4.0 is the latest version, released in 2017. However, you may find that previous versions, such as VantageScore 3.0, are still used by some creditors and lenders.

FICO ScoreVantageScore 4.0
Payment History (35%)Payment History (41%)
Amounts Owed (30%)Utilization (20%)
Length of Credit History (15%)Age/Mix of Credit (20%)
New Credit (10%)New Credit (11%)
Credit Mix (10%)Balance (6%)
Available Credit (2%)

How Student Loans Impact Your Credit Score

Student loans can both help and hurt your credit score. Here are a few ways this can happen:

How Student Loans Can Help Your Credit

Consistently Making Payments: Payment history accounts for a large portion of your credit score. So, consistently making on-time student loan payments can help your score quite a bit.

Adding to Your Credit Mix: Adding an installment loan, like a student loan, to your portfolio of credit accounts makes for a more diverse credit mix. While it isn’t essential to have one of each type of credit, it can give your score a small boost when adding a student loan to the mix.

How Student Loans Can Hurt Your Credit

Missing Payments: Again, payment history is the most important factor in determining your credit score. So, if your payment history is chock full of missed or late payments, your score is bound to take a hit.

Defaulting: Defaulting on any loan can have serious consequences, both for your credit score and your financial stability. In fact, with many student loans, defaulting could lead to wage garnishment, getting your debt sent to collections, or withholding future aid until the debt has been settled. Defaulting will take a serious toll on your payment history which, in turn, can drive your score down rapidly.

Does Paying Off Student Loans Help Your Credit Score?

While paying off student loans is certainly an accomplishment, it may not boost your score in the way you think. 

In fact, when you make that final payment on your student loans, the account closes, taking the payment history and age of the account with it. If you’ve missed a few loan payments, this could be helpful. However, in most cases, paying off student loans will reduce the length of your credit history. This could cause you to lose a few points in that category.

While this may hurt your credit score temporarily, it will likely rebound soon after (if everything else remains the same, that is).

Final Thoughts from the Nest

Student loans can affect your credit score both positively and negatively. To maintain your score, make loan payments on time. If you’re unable to do so, reach out to your loan servicer immediately to explore options that may help you. You may be eligible to refinance with one of Sparrow’s 15+ lending partners, switch to a better repayment plan (such as an income-driven repayment plan), or apply for a temporary period of deferment.

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