Student loans come in many varieties and sizes. Both the federal government and private lenders issue student loans to help students meet the financial burdens of their education. These organizations can tailor a student loan to meet nearly any level of financial need. Student loans are reported to the major credit bureaus just like any other financial obligation. Before taking out a student loan, it's important to understand the impact borrowing this sum of money has on your credit.
Before Signing
Before the promissory note is signed, lenders check your credit score to determine your eligibility to receive a student loan. A single inquiry into your credit score by a potential lender reduces your FICO score up to 5 points. This means a student loan begins being reported on and impacting your credit before you see a penny.
During School
Many student loans offer a deferred payment plan while you're learning, meaning the loan payments begin after graduation. The loan appears on your credit report like any other piece of installment credit information, marked "Paid As Agreed" even though no payments have been made.
Leaving School
Many student loans offer a "grace period" after leaving school before the loan enters repayment. The terms vary between lenders, but a period of up to six months is common. Once the loan enters repayment, the balance and paid amounts are reported on your credit, lowering your debt-to-income ratio in a positive way.
Default
A defaulted student loan remains on your credit, too. Missed or skipped payments, late payments and loans that have been sent to a collections agency are all reported on your credit. These negative entries have a profound impact on your credit rating and are not removed by filing for bankruptcy, so these judgments remain with you.
0 comments:
Post a Comment