Tag Archives: Education Loan

Does Student Loan go on one’s Credit Score?

Student loans are installment loans which means that you pay a certain amount over a fixed period of time. It affects your credit history like an installment loan; pay your loan EMIs consistently and your credit score keeps building, miss a payment and end up with a low score. However, student loans come with the liberty of a few extra months to complete the payment before you are reported late.

So, when you make timely payments, your lender sends the details to bureaus which establish your track record. You can take a look at these details on your CRIF Personal Credit Report once a year for free! Keep in mind that the student loan affects the credit score of the one who takes it up. If your parents take up the loan, their credit score will get affected every time the loan EMI is paid in time and every time it is not. A good score, however, will always be a plus point.

Related Reads: Educating Myself for My Education Loan

What happens if you pay late?
Sometimes you may get delayed on the loan EMI payments due to a financial crunch or it could simply skipped your mind. These are the usual slippages which the banks also take into consideration. But your score won get affected till your bank reports your late payment to the bureaus.

Some student loans extend a levy of 90 days while some report it within 30 days of missing a payment. Once this is reported, the entry remains on your credit report for 7 years. Despite not affecting your credit score right away, you missing a payment can be slightly expensive as banks start charging late fee as soon as you miss a payment.

Cannot pay the student loan? What do you do now?
It often happens that money falls short due to sudden expenses and in such cases, there are a few ways to reduce your monthly loan EMI amount or pause it till you sort things out. You can either sign-up for an income driven repayment plan which would basically set monthly payments of 10% to 20% of your monthly income. It can also be changed annually.

Another way to go about this issue is to apply for a modified payment plan which offers you flexible repayment options or you can decide to defer your loan which would pause your monthly payments. If you change your loan repayments in time then your credit score won’t get hurt. Just ensure that you pay the agreed-upon loan EMI each month.

How will refinancing affect my credit score?
Interest rates and repayment policies undergo changes whenever needed, in such a scenario, you can choose to refinance your loan. This means that you pick up another loan with policies and terms suitable to your needs with which you clear off the previous loan and move on to repay the new loan EMIs.

Every loan-related inquiry made on your credit score is a hard inquiry. This means that every time a bank runs this enquiry on your report, you lose a few points on your credit score. To avoid this, you can make sure that you apply for all the loans you are considering within a period of 14 to 45 days. All these will count as a single inquiry having only a single impact on your credit score.

Planning to pick up a student loan is a big step in anyone’s life, be it a parent or the students themselves. Ensure that you have emergency funds in place to repay it and have the right knowledge to take action.

All You Need To Know About Education Loan Process In India – An Infographic

Every parent dreams of their child graduating from a distinguished university or B-school. Here are key points to consider before you apply for an education loan.If you are considering an education loan to help finance your child’s higher education, here are some things you should keep in mind, before you decide:

Keep these points in mind, and you can easily plan your child’s education without a worry. Timely repayment of the education loan will eventually build a healthy credit score, not only for your child but for you too.

Educating Myself for My Education Loan

What if you wake up one day and no one trusts you? You can no longer buy the swankier car or that beautiful home you dreamt of. Have you ever had such thoughts? I have had, not very long ago. It was the monsoon of 2011 and India was witnessing some of the defining moments of the decade; Euphoria of India winning the Cricket World Cup, Mass mobilization against corruption inspired by Anna Hazare and Mumbai turning into a hot hunting ground for terror. Amidst all these, my heart was racing faster for my achievements of scoring 700+ in GMAT, grant of Scholarship from Wharton School and Said Oxford. I had landed in the kingdom of dreams. A dream of a joining a top 10 global MBA program bloomed.

Maroon 5 was right when they sang “Nothing lasts forever”. Before I could even climb the next ladder for my dreams, they were thrashed like the storyboard that had been tipped and jumbled, disjointing the order and twisting the timeline. Banks had refused to fund my remaining fees of 60 Lakhs for the education. I was being denied an opportunity because no one seemed to trust me.

Begging was the only form of request I hadn’t resorted to when I met Mr. Nelson, who rather than just rejecting my request, gave me a reason for not being able to help me. He told that my credit score was in the 500s, generally considered as a poor credit score, categorized as High-Risk Applicant by the Credit Bureau, and since it is one of the most important factors in the loan approval decision, no bank will consider giving me a loan with such a credit score.

I couldn’t rely on my heritage as both my parents are loan averse and had even discouraged me to apply for one. I realized that this new unknown “credit score” was standing between me and my dream. It was bizarre as I hadn’t heard of any such concept in the years of my preparation, not from any of my peers, not in any online forums, not in the coaching institutes, never. Having worked for top financial institutions and having traded in derivatives and share markets, I used to consider myself among the frontrunners in financial literacy. And, here I was not even aware of what a Credit Bureau was and what a Credit Score was, a part of the financial world which was about to change the course of my life.

On my way back home, I browsed through the internet to understand what a Credit Bureau was and why is the credit score so important. It was a sort of revelation to understand how critical credit scores are to lending and how most people like me aren’t even aware of it. I was of the view that I could find a way around this credit score and convince officials to grant me the loan, but then I knew, the only option left was to work on my credit score and park my dreams for the time being.

850. That was the number printed on my latest CRIF Credit Bureau Report. It’s an excellent credit score which is loved by every bank or lender I speak to. Today not only I am credit worthy, but I can ask for preferential interest rates on my loan. How did I get here? To unlock the trick or secret to an excellent credit score, read my next blog How I Raised My Credit Score By 250 Points.

About the Author: Subhankar Mishra works as Service Delivery Manager at CRIF High Mark, the only comprehensive Credit Bureau in India.