If you’re one of the 42 million student loan borrowers with debt on your plate, listen up! The factors below may help determine whether your student loans could cause a hit or a hike on your credit report.

Your payments

When it comes to student loans and your credit, your payment activity will largely determine if your credit score (see my $0 credit score) may go up or down. As with most bills, the more on-time student loan payments you make, the more favorable it will reflect on your credit score. Alternatively, anytime you are late or miss a payment, the more likely it may be for your score to take a hit.

Your student loans go into default

If you slip up on several student loan payments, your account could run the risk of a potential credit-crushing default. If a default lands on your credit report, it will likely do some damage. For this reason, it’s crucial to your credit for you to be proactive with your payments and consider a new repayment plan, such as an income-driven repayment plan (or IDR) if payments are an issue.

Your student loan repayment plan

If you choose to enroll in an IDR, or any other type of repayment plan, the plan alone should not impact your credit. But if your plan causes you to carry a large amount of debt paired with a low income, it could cause your debt-to-income ratio (or DTI) to go up. According to Experian, income is not listed on your credit report. Therefore, the amount of money you make won’t have a direct impact on your score. However, lenders may still look at your DTI when determining whether or not to approve you for a new line of credit. As a general rule of thumb, you should strive to keep your income high and your debt low in comparison.

Your credit mix

On the hike side, student loans can contribute to a healthy credit mix if kept in good standing. In the financial world, two types of credit rule your report: installment loans and revolving credit. Student loans are a type of installment loan. This means you have a set payment amount spread out over a set period of time. Revolving credit, like a credit card, can change as your financial activity changes. Your payments in a revolving line of credit will also vary based on your purchases. Generally speaking, a healthy credit mix consists of responsibly managing both installment loans and revolving credit on your report.

Your student loan debt is forgiven

If your student loans are 100% forgiven, first and foremost, congratulations! Second, forgiveness may show up as an account with a zero balance on your report. As far as the possible impact forgiveness could have, a small score decrease could be possible. Here’s why. If your student loan account(s) is the only installment loan on your report, a change in status could affect your credit mix which may result in a score dip.

You paid off your student loan debt

Similar to debt forgiveness, successfully paying off your student loans is a huge accomplishment! But for the same reason above, if your paid account is no longer active on your report, it could result in a small ding if your credit mix is affected. Per Experian, the good news is that this possible ding is usually temporary. By the same token, paying off your debt may even cause your score to rise in the future.

Will the pandemic’s payment pause affect my credit?

In short, no. The CARES Act passed in March of 2020 was meant to provide financial relief during the unprecedented COVID-19 pandemic. For federal student loan borrowers, this relief meant an automatic pause in their student loan payments. Due to the nature of this halt and the source it came from (the U.S. government aka the lender) the CARES payment pause should not impact your credit score. Since the act’s initial passing, this pause has been extended several times. The latest expiration date is now set for May of 2022. Once the pause expires, any late or missed student loan payments may run the risk of negatively impacting your credit.

You experience a change in student loan servicer

According to a report by CNBC, DOE contracts with select student loan servicers like Fedloan and Navient recently expired. As a result, millions of borrowers already have or will experience a change in their student loan servicer. Because of this, some borrowers may notice a zero balance on their credit report(s) from their previous servicer. As with the forgiven and paid off scenarios above, if an account with a zero balance is shown on your report it could impact your credit mix. If this happens, it may cause that small, but likely temporary decrease in your score. Additionally, if an account change ever results in a decrease to your credit history, it could also affect your credit score.

How to take control of your credit

If you have student loan debt, or any debt, the first step in taking control of your credit is to know where you stand. Software solutions like ScoreShuttle allow you to review and manage your student loan credit status with all 3 bureaus. To find out if and how student loans are impacting your credit, click below.

Review My 3-Bureau Credit Reports & Scores

Student loans and your credit

Small hikes and hits are fairly common when it comes to student loans and your credit. But no two borrowers or credit situations are alike. And overall, the credit experience you may have will ultimately be determined by your personal financial activity, as well as what’s listed on your unique credit reports. If you never miss a payment and are proactively paying down the debt, student loans can be a positive asset to your creditworthiness. On the flip side, if you miss payments or end up in a default status, your credit could take a nosedive. For best results, always make your student loan payments on time and monitor your 3-bureau credit report regularly for updates.