How Can a Student Loan Affect Your Credit Score?

Student loans can significantly influence your credit score, impacting your financial health and ability to access credit. The below insights can help you manage it responsibly to maintain a positive credit profile:

Establishing Credit History: Timely payments help establish a positive credit history, showcasing your ability to handle credit responsibly.

Payment History: While timely payments will have a positive impact on your credit score, missed or late payments will lower your score.

Credit Utilisation: Student loans are instalment loans that add to your total debt but do not impact your credit utilisation ratio. Maintaining a low credit utilisation ratio is important for a good credit score.

Loan Amount and Debt-to-Income Ratio: The total amount of debt you accumulate concerning your income can influence your debt-to-income ratio. A high ratio may affect your ability to qualify for mortgages or car loans.

Several financial institutions, like Shriram Finance, are diversifying their portfolio to include education loans for students and professionals who are looking to upskill. Once they offer such a loan in the future, the same principles would apply.