Wednesday, May 8, 2013

Your Student Loans Will Affect Your Credit Score

A financial lesson to for new graduates

This guest post was written by Go Banking Rates, bringing you informative personal finance content and helpful tools, as well as the best interest rates on financial services nationwide. Visit them online to read more student loan articles.

Student loans are a form of debt, which means having one will affect your credit score. Of course, it's pretty hard to get through school without one.

If you're worried about the impact a student loan could have on your credit, know that how you handle it will determine whether that effect is positive or negative.

How a Credit Score is Calculated

Your credit score is an extremely important number. As a soon-to-be or recent college grad, your credit score will play a huge role in your financial future. Basically, it gives lenders and creditors an idea of how financially responsible you are--how heavily you rely on credit and whether you pay bills on time, for example--and helps them judge the level of risk you present as a borrower.

Your credit score will play into how easily you can obtain credit cards, loans and even an apartment, so taking care of it now will save you a lot of grief in the future. Here's a breakdown of how your score is calculated:
  • Payment History: Your ability to consistently pay bills on time makes up 35 percent of your score.
  • Amount Owed: Coming in at a close second, the amount of debt you owe is 30 percent.
  • Credit History: At 15 percent, the length of time you've been using credit is also considered.
  • New Credit: 10 percent of your credit score is reliant upon how often you open up new lines of credit.
  • Types of Credit: Also at 10 percent, the varied types of credit you possess (credit card, student loan, auto loan, etc.) will affect your score.

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