How Student Loans Affect Your Credit Score

2 (3)Raise your hand if the financial world seems like it's constantly changing and it’s hard to keep up. [Raises hand.] [Thank you for your honesty.] [Nods.] Look: Federal rates are increasing, inflation continues to rise, and the housing market feels like a big expensive question mark. And tuition costs? You've seen your tuitions costs. 😩 

So, where does this leave you and your student loans? Well! We're gonna get to that and more as we cover some top questions about student loans and credit history. 

Q: How do student loans affect my credit score?

Student loans affect your credit score in several ways. First, they add to your debt-to-income ratio, which helps lenders determine if your income can repay your debt. Student loans are a part of your average account history. Your payments also count towards your payment history—one of the most critical aspects of your credit score.1 (2) 

Q: Aren’t payments paused? What benefit is there to paying during the pause?

Payments are currently on hold until September 1, 2022. The biggest benefit to paying during the pause is that all payments go towards principal, not interest. So you are making the biggest payments possible towards your balance and can save a lot in interest in the long run. 

Q: How do I know if my student loans negatively impact my credit score?

It’s essential to keep an eye on your credit score. Checking it regularly through apps like CreditKarma will help you maintain healthy credit. You can also find a commentary on your score and what is affecting it. If you notice a sudden drop in your score, be sure to resolve the issue quickly.

Q: What happens to my credit score if I miss a payment or multiple payments? 

Payment history is one of the most significant factors in a healthy credit score. Missing one payment can cause a significant dip in your score—several can do even more damage. So always make minimum payments to avoid damaging your score. 

The good news is that you can recover your credit score faster than most people think, so get back on track with your payments as soon as possible and give it time.3 (3)

Q: What if I can’t afford my student debt? What do I do if my interest rate is too high?

Student debt can be a significant obstacle to financial freedom. Make sure you only take out necessary debt, take advantage of scholarships and grants, and be aware of your repayment schedule. 

If you already have too much debt, you can contact your lender to see if they can negotiate. You can also try refinancing or consolidating debt through many programs. Do your research to make sure they are reputable companies and that they are helping (some charge you more through hidden fees and requirements). 


Kora is dedicated to helping college students successfully manage their finances now and after graduation. Use our app to track your finances with deep insights into your spending habits; manage your money better with our budgeting tool; and if you need some cash, we can spot you!  Get started today!





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