Student Loans: How Late Payments Affect Your Credit Score?

ByRichard C. Sloan

Apr 4, 2022

Kameleon007 /

In response to the COVID-19 pandemic, most federal student loans have been suspended since March 2020. Interest on student loans has been set at zero and collections have been halted on delinquent loans through May 1. of this year. Defenders are calling for new loan breaks and an unprecedented loan forgiveness system.

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Regardless of when you need to resume your payments, student loans are debt like any other, and your payment practices can help or hurt your credit score.

Even a single payment default can cause a borrower’s credit rating to plummet. A series of missed student loan payments can hurt your credit score — and your financial future. On the other hand, executing a repayment plan correctly can boost your credit score, which will help you apply for future loans and credit cards.

There are many types of credit scoring models. The most common, the FICO system, uses five factors to determine your score: payment history, amounts owed, length of credit history, new credit applications, and credit mix. Depending on these factors, your credit report will have a score ranging from 300 (poor) to 850 (excellent).

Of these criteria, payment history is the most important in determining your score. Late payments can have a negative effect on your credit score. Neglecting to meet payment deadlines can place you in default or delinquent status. When you are consistently late on payment, it is reported to the major credit bureaus (Equifax, TransUnion, Experian).

Although there is no difference between the impact of private and federal student loans on credit scores, the way they can affect your credit rating is different due to their relative terms. Federal loans are generally more forgiving, as they have a 90-day waiting period before you are flagged. This means that you have three months to work out an arrangement with your lender.

Private lenders could report late payments as early as 30 days past due. Depending on the terms of the student loan company, you may also be subject to late fees, which will increase your loan balance and interest.

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Whether you’re due to start paying off your student loan in May or later, it’s important to think about how you’re going to do it. By establishing a good credit payment history, creating a credit mix, and not living beyond your means, you can start building your credit score even while in school – and avoid damage to your credit score. credit that could stay with you for years.

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About the Author

David Nadelle is a freelance editor and writer based in Ottawa, Canada. After working in the energy industry for 18 years, he decided to make a career change in 2016 and focus full-time on all aspects of writing. He recently completed a technical degree in communications and holds previous university degrees in journalism, sociology and criminology. David has covered a wide variety of financial and lifestyle topics for numerous publications and has experience writing for the retail industry.