Missed student loan payments could drop your credit score by 63 points if your score is in the low-to-mid six 600s.
Got a high score? Defaults can slam you with a massive 175-point drop according to Transunion.
Even being late just one time, but not defaulting, could cost you up to 129 points!
Why is the drop so brutal? Higher scores fall harder, so one bad mark hurts more!
Having multiple loans also means more score dropping.
Now add that to each loan reported late, possibly at each of the three credit bureaus, equals a bigger hit!
And those dings? They can haunt your credit for up to 7 years!
So, if you’re struggling with payments? Don’t wait to take action to protect your credit score.
Steps to recover your score from delinquent student loan payments
Contact your servicer
Act fast to contact your servicer and explore repayment options. If you’re struggling, contact your loan servicer to discuss options such as deferment, forbearance, or income-driven repayment plans to avoid missed payments.
Make On-Time Payments
Make sure you’re paying all other obligations timely. Payment history is the most significant factor in your credit score, accounting for 35% of your FICO score.
Keep Credit Card Balances Low
Don’t max-out your credit cards. Owing less on revolving debt, such as credit cards, can quickly improve your credit score. Aim to keep your credit utilization rate below 10 to 30 percent of your total available credit.
Review and Dispute Credit Report Errors
Dispute any inaccuracies, especially if a student loan is incorrectly reporting dates, amounts owed, missing payments, and balances.
Check your credit reports from all three major bureaus (Equifax, Experian, TransUnion) for errors, and if you dispute, request a deletion, not a correction.
Limit New Credit Applications
Each new application triggers a hard inquiry, which can temporarily lower your score. However, there is an exception to limiting new credit applications.
If you have no or very few positive accounts reporting, consider opening easy-to-get credit that essentially uses everyday transactions like buying gas, groceries, paying utilities or rent to report those payments as positive.
This will ensure positive information is reporting monthly without incurring additional debt.
Pay Off Collections and Old Debts
If you plan to pay off an old collection debt, ask the creditor for a pay-for-deletion agreement so the account is fully removed from your credit reports.
Otherwise, unless your lender uses a newer credit scoring model, like FICO 9, that ignores paid collections, simply paying off the debt may not boost your credit score.
Final takeaway
By consistently applying these strategies, borrowers can mitigate the negative impact of student loan delinquencies and work toward improving their credit scores over time.
