How to Establish Credit With a School Loan

Your credit history is one of the main factors lenders consider when evaluating your application for a credit card or loan. Whenever you borrow and repay money, the lender reports your payment information and loan details to the credit bureaus. The credit scoring formulas consider the whole of your credit history, including how long you have been managing credit, what types of credit you have, whether you have applied for credit recently, how much you owe and how consistent you are with payments. Borrowing and repaying a student loan can help build history in each of these areas.

Instructions

1

Fill out the Free Application for Federal Student Aid to apply for federal student loans. Even if you and your family make a lot of money, you can still qualify for unsubsidized Stafford loans from the federal government. These loans have a relatively low interest rate and you do not need a co-signer.

2

Apply for private student loans with other lenders if you need more money for school. If you have no credit history, the lender will likely require you to have a creditworthy relative or friend co-sign the loan for you. However, you should not borrow more than you anticipate you will be able to afford to pay back.

3

Make payments on your student loan while you are in school to start building your credit history sooner. According to MSN Money, your student loans might not appear on your credit report until you begin repayment. If they aren't on your credit report, they won't help much with building your credit. Contact your lender to find out how to make payments.

4

Sign up for automatic monthly payments after you leave school. This will ensure that you make your payments on time every month. Late payments hurt your credit score, whereas on-time payments build credit.

5

Make extra payments on your student loans when possible. Reducing your balances improves your credit score because part of the formula compares the amount you owe to what you originally borrowed.