A credit score that has less than perfect credit can still be improved by paying off your student loans on time. However, this process will require some time and effort. The sooner you pay off your student loans, the better, as your credit score will increase over time. The following are ways to improve your student loan credit score. Read on to learn more. Here are some tips for achieving better credit:
Paying bills on time
One of the most overlooked ways to improve your student loan credit score is by paying your loans on time. While late fees and late payments hurt your score, they will have minimal effects if you make your payments on time. In addition, your payment history will increase your FICO score. That’s great news if you’re planning to get a loan in the future. But what if you have a high-interest student loan?
When you make timely payments on your student loans, you’ll significantly boost your credit score. Since 35 percent of your score is based on your payment history, even the slightest late payment can hurt your score. Delinquencies and late payments can damage your credit score and make it difficult to get approved for other loans. To avoid this, pay your loans on time and avoid missing them. In some cases, you may be able to get approved for another loan if your student loan debt is low.
The average student loan borrower has a debt-to-income ratio (DTI) of about 13%, leaving little room for debt growth. Student loans can be especially burdensome for borrowers because they take up a large chunk of their monthly income, and this makes them look like dangerous propositions to lenders. To make matters worse, many students may choose a less expensive school, thereby increasing their DTI.
Your debt-to-income ratio is a way to assess your creditworthiness. By keeping your debts to a reasonable level, you can borrow for college, refinance your student loans, buy a car, and get a mortgage. A good DTI is around 35%. Most mortgage lenders will want to see this figure around 43 percent. A good DTI is always better than a bad one, but there are some things you can do to make it better. You can calculate your DTI by pulling your credit report.
Refinancing student loans with bad credit
Refinancing student loans with bad credits is possible, but there are many factors you need to keep in mind before you apply for a loan. First and foremost, you must make all payments on time. Your score will depend on your payment history, and the longer your credit history, the better. Secondly, your credit score will be affected by major issues such as bankruptcy or foreclosure. Thirdly, the higher your debt is, the more negative points you will accrue.
Fortunately, refinancing student loans with bad credit is still possible, and you can reduce your monthly payment with some help from a co-signer. While many lenders allow co-signers, some, like Earnest, don’t. If you do opt to use a co-signer, your loan will be reflected on your co-signer’s credit report. That means lenders will consider your refinanced loan as part of their overall debt load. Any missed payments will negatively impact the co-signer’s credit score, and if you’re unable to make payments, the co-signer will be required to pay.