Posts Tagged ‘use student loans to build credit’

How To Use Student Loans To Build Credit?

Before you find out how you can use student loans to build credit, you must first have a thorough understanding on how student loans work. They work very much like a credit card; it is just that they allow you to start making the repayment toward the same only after a very long time when you have completed the course you had borrowed the loan for and have got a job. For Federal student loans allow you six months of extra time after you get a job before you can start making the repayment. However, the exact terms may vary significantly depending upon which type of student loan you have borrowed and from which lending institution.

Paying Interest While Still In School

Many lenders require you to pay at least the amount of interest while you are still pursuing the course and studying in school. Since these payments are small, it is always advisable to agree to pay it off while you are in school. This way, you can reduce the debt burden significantly while it will also help you build good credit. This is one of the easiest ways to use student loans to build credit. However, if there is no way you can afford even that much payment every month, you have the option to defer until you graduate and get a job.

How Your Credit Score Is Affected

If you choose to defer the payments until you graduate and get a job, the effects of student loans on your credit report will depend on whether or not you are making the repayment in a timely manner. Most loans will require you to pay a certain minimum amount every month. If you are making late payments or making defaults, it will hurt your credit score. Therefore, even if you are not able to get a dream job after graduating, you must accept whatever is being offered to you because you need a regular source of income at this stage to ensure timely repayment toward your student loans.

How To Give A Boost To Your Credit Score?

You can use student loans to build credit and give it a significant boost by choosing to make not just the minimum required payment but much more than that. The higher amount of money you pay extra every month, the faster your credit score will improve.

Overall, you need to demonstrate great financial discipline after graduating and after getting a job. If you follow the above strategies thoroughly, you can easily use student loans to build credit.

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