How Does a Student Loan Default Effect Your Credit Score?
Exactly how one negative item will affect your credit score is somewhat of a mystery and has been the subject of much criticism of the three main credit bureaus. How a defaulted student loan on your credit report affects your credit score will differ from how it affects your neighbors credit score. We do know this: A defaulted student loan on your credit report is wreaking havoc on your score. A credit score is comprised of several elements:
Payment history
Payment history refers to how you have been paying your bills and installment loans. How often have you missed payments? How long have you let payments fall past due? 30 days? 60 days? More than 180 days? Have any of your creditors written off your balances as bad debt such as the charge off you are concerned about? Has anyone sued you for payment? Have you also defaulted on a student loan or a car loan? If you have any of these negative entries on your credit report it might be time to call a credit counselor and take a serious look at your credit habits.
Amounts owed
This not only refers to the obvious: how much money do you owe your creditors but also how much do you owe in relation to the credit limits on your accounts. Are your credit cards maxed out? How many accounts do you have that show unpaid balances? Even if you are paying your bills on time, if you have a large number of bills they could be affecting your credit score negatively and lenders see you as a risk.
Length of credit history
How long have been responsible (or irresponsible as the case may be) with credit? Does your credit report show you as being a trust worthy borrower? How about new credit? Have you been applying for lots of credit recently? This also flags lenders that you might be looking to make a number of large purchases or maybe you are short on cash and need to open credit to make ends meet in the short term.
The numbers of scenarios that affect your credit score are vast. No one can tell you exactly how much one defaulted student loan is lowering your credit score but if hire a reputable credit attorney he or she would know better than anyone. There are a number of terrible consequences of having a student loan in default. A bad credit score is just one of them. Call a credit repair service. They can advise you on how to best improve your credit score and get that loan in good standing.
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