Do Student Loans Affect Your Credit Report?

- by Becky Hall

Student debt is a fact of life for anyone who wishes to get a university education. Can student loans affect your credit report and the ability to get credit later on in life? Read on to find out.

Do Student Loans Affect Your Credit Score? - Cashfloat explains

The term student loan can instil fear into many parents and prospective students when they hear that they will leave university with an average debt of £32,220. It’s a lot of money. Although Cashfloat offers short term loans for students under specific circumstances, our loans are not designed for this purpose and can be extremely expensive. Instead, we’ll explore the option of student loans and what impact your student loan can have on your credit score. Student loans do not work in the same way as consumer credit. They are pretty different. Student loans have fixed payments and low interest rates, unlike consumer credit which can have compounding interest rates that fluctuate and risks attached to lenders.

How Do Student Loans Work?

Here are some brief points about how student loans work:

  • The repayments are made through the income tax system
  • The payments begin once the graduate earns over £27,295 in a year*
  • Loans before 2012 begin repayments over £20,195 of earnings
  • The repayments increase alongside earnings
  • If a person doesn’t earn enough, then they do not repay
  • Debt collectors will not chase repayments
  • Many will repay for most of their working lives

Full details regarding student loan repayments are beyond the scope of this article. Click here for more details.

Did you know? After 30 years, all remaining student loan debt is wiped out. - Cashfloat

Student loans do not affect credit ratings

To assess the amount of money that a lender could make on a prospective borrower, they will have to check three sources of information:

  1. The application form
  2. Any previous financial services that an applicant has previously had with the company.
  3. The applicant’s credit files. Most of the financial transactions that a person has had so far will be listed on their credit reference. This excludes student loans. The exception is people who took out student loans before 1998 and have had problems repaying.

When a lender is assessing an applicant’s credit file to assess their borrowing potential, they will not be able to see if an applicant has student debt. When a large sum of money is being requested for a personal loan or a mortgage, the lenders may directly ask the applicant if they have a student loan. Having a student loan when a person is trying to get a mortgage from a lender may impact their decision, but to a lesser degree than most people believe (for example, less than if you’ve had a direct lender payday loan in the last year).

How do Student Loans Affect Mortgage Applications?

Although having student debt will be worse for an applicant than for someone who does not have it, graduates tend to have higher salaries, which cancels some negativity. When lenders assess applicants for mortgages, they will perform affordability checks. This means that they will calculate the actual amount of money that a person has left from their salary after having made student loan repayments to see how they will be able to afford the mortgage repayments. Naturally, lower repayments will mean a lower amount of money they will be prepared to lend.

Paying off Student Loans Early

There are no penalties for early repayment when a student loan is taken out. Generally speaking, it is correct to clear off their debts as fast as possible when one is in debt. However, it is not the case for most people with student debt. Many people will not have to repay the full amount before it is wiped off after 30 years. As repayments are calculated on what a person earns instead of what they have borrowed, clearing off the debt with a considerable cash sum could mean paying out money you may never have to.

When can student loans affect your credit report positively?

Student loan repayments can add points to a credit score when repaid correctly. Other forms of consumer debt, considered good debts, are credit for things you can easily afford to repay. Not having a credit score is the equivalent of having bad debts as far as lenders are concerned. As student debt is income-related, if a person is earning less than the minimum repayment figure or is not earning due to unemployment, the repayments are frozen until the person is able to pay again. This makes student debt quite different from other online loans as lenders consider a person’s financial situation and immediately stop collecting when you can’t afford to repay.

How Student Loans Affect Your Credit – Conclusion

In this article, Cashfloat have explored how student loans affect your credit report. Unless repayments are missed, a credit report will not be affected by having a student loan. In fact, it can improve a credit score when payments are on time, as not having a credit score can be as damaging as a bad one. Getting a mortgage could be affected by having a lower debt to income ratio. However, graduates tend to have higher salaries, so this can be cancelled out. Getting an education is worth incurring what is considered good debt. But, take into consideration that you may be taking on a debt that you may never repay.

Read about how student loans can affect your mortgage opportunities - click hereRead about how student loans can affect your mortgage opportunities - click here

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Budgeting for Students – Save Money in University

*Updated 10 April 2022.

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About The Author
Becky Hall
Becky never thought she would be a financial blogger. But Fate arranged that Becky had to put her accounting degree on the back burner right after she graduated with a first in Business and Accounting. While doing bookkeeping as a freelancer for private clients, Becky noticed how many cashflow problems can be solved with a little bit of education. Trying to keep her clients out of debt, Becky began writing resources which she distributed to clients. What began as writing advice for clients evolved into a passion and now Becky found her platform at Cashfloat. When she isn’t writing, calculating or budgeting, Becky can be found at her piano playing something classical.
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* Cashfloat terms and conditions apply. Applicants must be 18 or over. All loans are subject to affordability, applicant verification and traditional credit checks via various national databases by Cashfloat responsible lending policy. In most cases, loan decisions may take up to 30 minutes during office working hours. If your bank does not support Faster Payments, funds will be sent to your account the same day as approval so long as you’re approved by 16:30.

*Money will be funded to your bank within 1 hour of approval - Mon-Fri during working hours.

Representative example: Borrow £700 for 6 months. 1st monthly repayment of £168.45, 4 monthly repayments of £224.60, last monthly repayment of £112.20. Total repayment £1,179.05. Interest rate p.a. (fixed) 185.39%. Representative APR 611.74% Our APR includes all applicable fees. Daily interest is capped at 0.798%.

Warning: Late repayment can cause you serious money problems. For help, go to