How Student Loans Lower Your Credit Score

Credit score is an important indicator on the credit worthiness for a person. A person who has a score higher than 750 will enjoy much lower interest rate if compares to a person who has a score below 650. Therefore, increasing your credit score by 100 points will save you thousands of dollars in paying on interest.

You have the responsibility to keep your credit rating as high as possible, but before that you have to understand the causes that have negative impact on your credit score. One of them is student loan. Below are some commonly unknown facts about how a student loan can potentially reduce your credit rating.

1. Student loans are reported in triplicate

One of the variances in credit score computation is the outstanding balance, the more you owe, the lower the score. In most cases, student loans will be reported in triplicate in your credit report, meanings that if you borrow $20,000 of loan, your credit score will be calculated based on $60,000 of debt. This will not only greatly lower your credit rating, but also impact on the amount of interest you need to pay. Most people never know about this fact. They just try their best to pay off the loan on time, but due to the loan is reported triplicate, they don’t get the score they deserve. So, it is better to explore for other funding resources before you decide to take student loan.

2. You score low in credit rating if you pay off the loan fast

Lenders don’t like their borrowers to pay off their student loan faster as they earn less interest if the borrowers clear the loan fast. It may sound unfair because you have the right to pay off the loan as quickly as possible, but it is a fact. Generally, your credit score will be lower by 10 to 15 points just because you pay off the loan sooner. However, it is not a bad thing to start paying the loan once you are afforded to pay it because it saves you thousands of dollars on interest. Sadly, it is the fact you have to know: paying off the student loan fast does not help in your credit score; instead it gives negative impact to lower your score.

3. Loans with too long repayment period lower credit score

Student loans with repayment period longer than 10 years will lower your credit rating because it will be reported as “too long to pay off a debt” in your credit report. As the repayment period is one of the factors in credit score computation, your score will be affected if you take up a loan with long repayment period.

Anyone who plans to take student loan from Sallie Mae need to aware that one loan from Sallie Mae will be considered as 7 different loans in credit report. Since the student loans in most cases are being reported in triplicate, it will look like you have borrowed 21 loans and your credit score will be badly impacted.


Student loans give negative impact to your credit rating and low your credit score. It is better to explore other funding resources to aid your study.

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