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Student Loans And Your Credit Score
Aug 29th
Everyone wants to get a great job, and because of that they usually spend the money to go to a good college – a good education usually means a better paying job. Yet, education is not cheap these days and therefore many people have to take out student loans to afford a college education. When graduation arrives, most students usually are able to get a job; however, the entry-level job is not adequate to pay of their student loans anytime in the near future. Paying of the loans becomes a major concern for these college students, and in addition the concern is whether or not their credit score will be in good shape with the amount of debt they have upon graduation.
According to statistics, the most difficult part about the future of college graduates with high levels of student loan debt will lie in their ability to obtain credit. Because most recent graduates have a high level of debt and a lower initial salary, creditors will most likely be hesitant to give them access to new credit. Also, if their past credit rating is not good, it will make obtaining credit even more of a challenge.
Usually, for most college graduates, the debt they have accumulated with student loans is the largest sum they have ever had. For this reason, their credit is affected. Many times, we think our credit is fine if we pay our liabilities, however, your credit rating also considers your total level of debt. Therefore, it is not surprising that college students who graduate with high debt will see a drop in their credit score.
If you do intend to take out student loans or you already have them, you should consider determining a plan for paying them off now. A successful payment plan will be instrumental in helping your credit score, especially since your credit score involves the level of debt and your payment history. When you establish a payment plan, you will help yourself financially by promoting healthy financial habits that will only further help your credit score and your financial life in the future.
Also, for those who have student loans and have not yet graduated, one of the best tips for helping your credit and the payment process is to start paying on the interest now. The government usually allows you to wait until after graduation to begin making payments, however it can be surprising how much the loans add up to over time. If you can pay some while in school, do so; and, you will be avoiding costly interest and a larger sum to be paid back upon graduation.
One of the nice perks about student loans is that they give you a grace period after graduation, allowing you approximately 6 to 12 months to begin the repayment process. This grace period enables you to find a job and get on your feet financially before you begin making payments. Many people actually find employment before their grace period ends, and if they do it is a good idea to set aside money to use towards your beginning payment. This way, they can start off with a decent payment amount, and hopefully continue making consistent payments in the future.
Just like most loans, student loans usually have a timeline that requires your payment in full – usually 10 years. Your monthly payment will be determined on this timeline, however, if you can afford to, it would be smart to pay more than the minimum payment. When you do this, you will obviously pay it off sooner, and you will also avoid paying more interest than you need to.
For some people, their student loan payments may be high depending on their level of debt; yet, this does not mean you should skip payments. Instead, the wiser decision is to talk to your lenders and negotiate a payment plan that will work for your situation. If you can demonstrate your willingness to act in good faith, you might be surprised at the lender’s willingness to work with you. Therefore, if your situation requires it, talk with someone today so your credit does not have to be affected because of skipped payments.
Most importantly, do not default on your student loans, because your credit will be in serious jeopardy if you do so. Chances are it will remain on your record for 7 years. Also, if you default on your loans, you could find yourself in legal trouble and your wages could be garnished. Instead, avoid the trouble and pay your loans off.
While student loans are necessary for many, when it comes to your credit, they can be risky. Be careful and responsible when it comes to paying them back. You will be glad you did.
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Are Student Loans Going To Hurt My Credit?
Aug 22nd
In today’s economy, many people are willing to go into debt for a college education, hoping for a brighter financial future. Unfortunately, student loans are not simple, and they often cause college students to graduate with a lot of debt. In most cases, upon graduation, the entry-level job that these college students start out working in does not make paying back the loan easy. Because of these circumstances, many people are worried about the affect that student loans have on their credit.
Many people with student loans find it more difficult to get access to credit today, leading many to believe that their credit is suffering. While their credit may not be horrible, there are lenders or creditors out there who might be skeptical about giving them credit or a loan because they already have a high level of debt and their salary does not indicate the ability to pay off their liabilities anytime in the near future. Also, if your credit rating was poor in the past, student loans will only hamper it in the future.
Usually, for most college graduates, the debt they have accumulated with student loans is the largest sum they have ever had. For this reason, their credit is affected. Many times, we think our credit is fine if we pay our liabilities, however, your credit rating also considers your total level of debt. Therefore, it is not surprising that college students who graduate with high debt will see a drop in their credit score.
One of the best ways to maintain a decent credit rating is to plan for dealing with the student loans now. Since your credit score evaluates your level or debt and payment history, a successful payment plan will not only lower your debt level, but it will also help establish consistent payment habits. In doing so, you will find that you can help your credit score even though you may feel that it initially was lowered upon graduation.
Also, for students who have not graduated college yet, consider making payments on your interest now rather than waiting until after graduation. Usually, the government allows students to wait until after graduation to begin paying their loan balances; though, interest adds up and you can get a head start by making payments while you are still in school. One reason for the problems with student loans is that people do not realize the amount they have to pay back. Interest adds up overtime, and then they graduate with a larger amount than they anticipated having to pay back.
One of the nice perks about student loans is that they give you a grace period after graduation, allowing you approximately 6 to 12 months to begin the repayment process. This grace period enables you to find a job and get on your feet financially before you begin making payments. Many people actually find employment before their grace period ends, and if they do it is a good idea to set aside money to use towards your beginning payment. This way, they can start off with a decent payment amount, and hopefully continue making consistent payments in the future.
Just like most loans, student loans usually have a timeline that requires your payment in full – usually 10 years. Your monthly payment will be determined on this timeline, however, if you can afford to, it would be smart to pay more than the minimum payment. When you do this, you will obviously pay it off sooner, and you will also avoid paying more interest than you need to.
For some people, their student loan payments may be high depending on their level of debt; yet, this does not mean you should skip payments. Instead, the wiser decision is to talk to your lenders and negotiate a payment plan that will work for your situation. If you can demonstrate your willingness to act in good faith, you might be surprised at the lender’s willingness to work with you. Therefore, if your situation requires it, talk with someone today so your credit does not have to be affected because of skipped payments.
Also, make sure that you never default on your loan because it will harm your credit. A default on your student loan will remain on your credit record for approximately 7 years, it could cause legal issues, and your wages could be garnished. Therefore, do not neglect your loan.
For many a student loan is necessary and although it may be a tad risky for your credit, there are ways to safeguard your credit and pay off your student loans in the process. Responsibility is key. And, when you are paying them back, prioritize them so that your credit is protected.
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Student Credit Card FAQ’s
Jun 6th
Just as the word implies, student credit cards are credit cards meant solely for students, many that have not earned a documented income with employment. Credit card issuers are aware of students and their credit challenges so they make accommodations for students when building student credit card offers specifically. Typically, the only restriction when applying for a student credit card is the age of the student, and as mandated by the law of the country, which is typically 18 years old and above at the time of application. In many ways, a student credit card is almost the same as traditional, run-of-the-mill credit cards. But the major difference, is the standard APR, or interest rate, levied for card purchases, which is relatively higher than a traditional credit card APR.
Student credit cards provide more financial flexibility for young students. But, while it may come in handy when paying the rent, paying tuition, purchasing books, and other necessary items like food and clothing, unbridled card swiping can sometimes lead to financial trouble, especially in the form of poor credit scores and damaged credit histories. To a certain extent, this can be blamed on a lack of education or awareness as young people, often times, will not think too much about the concept of credit scoring or the idea of building a good credit history. As a result of this lack of awareness, they will typically not restrain themselves from using the credit card freely either.
The danger of poor credit scores will not become readily apparent, but will certainly become apparent when the student approaches a bank for credit at a later point in time. Credit profiling or credit scores, as determined by any of the three credit bureaus, represent an individual’s credit life history, and black marks on credit histories, however they are acquired, will make it difficult, at worst, more expensive, at best, to secure the lowest possible interest rate on the loan or financing. So, consequently, even if one manages to get the home loan or car loan, for instance, the interest rate, in order to accommodate the increased credit risk perceived by the bank, will be higher than normal, and in turn, much more expensive for the borrower. The bottom line is that student credit cards represent a potential risk to future economic standing if the cards are not used judiciously.
As previously mentioned, it is clear that unrestrained use of a student credit card can easily damage an individuals budding credit score and credit history profile. But on the flip side, knowledgeable spending and timely payback can go a long way toward building a solid credit history and credit score. Using the card for essential purchases that are well within his/her payback capabilities and making the payments within the due date can improve one’s credit rating exceedingly.
The rules of credit bureaus are pretty straightforward. The amount of money that an individual borrows will be reflected in his or her credit report and the credit limits that each person can retain will be reflected in the amount of credit that the individual has previously “borrowed” and has paid back on time. Simple, right?
One additional point of interest…the credit card company is supposed to report each transaction that is been done on a particular credit card account to the three major credit bureaus hastily. But this does not happen in every case. More distinctively, secure student credit cards or prepaid cards, often times will not report transactions to the major credit bureaus. Therefore, it is the user’s responsibility to make sure that the credit card transaction history is indeed being reported to the credit bureaus and is being done done in a timely manner. Remember, an unnoticed credit transaction does not do any good to improve your credit history.
About the Author:
Jonathan Summers is employed for a well respectedcredit debt collection corporation and is here to assist with yourr credit collection needs