It’s been awhile since I’ve posted to this blog mainly because it has been very busy at the Student Loan Network. We get requests for help in lots of ways but mostly by phone. June, July and August our call volume spikes from students, parents, schools, lenders, or other industry partners. Loan consolidation has been the hot topic for awhile now with borrowers. Recent graduates want the most affordable repayment plan with the best savings so they call up and pick our brains about loan consolidation. Also, during peak times, borrowers are busy completing promissory notes, so we’re getting calls from students about how to fill out our online application for the Stafford, Plus, and GradPlus loans. Personally, it is my favorite time of the year because I really feel like I am making a difference in the life of a student. Well, need to run. Sorry so short but the phone is ringing.
Got another moment between calls and I thought I would add some more comments to this post about student loans and how students can manage their finances to help them get through school and become successful in their careers. Believe it or not the student loan is probably the first time most students have anything to do with a lender and borrowing money. They are brand new to the entire process and some are concerned about what this loan will do for their education, but some want to know about credit ratings and how this will affect them when they graduate. So we thought we would write about this subject a bit to help answer these questions.
What Do You Need to Do to Establish a Credit Rating
The thing about credit ratings is that first you have to have some history to establish a credit rating in the first place; otherwise there is nothing to rate you on. Having a student loan is a good step and so is having a credit card. In fact having a credit card is one of the things that most students should consider right off the start if they want to establish some sort of credit rating. Avoid having more than two cards, since a lot of cards can actually lower your credit rating due to the perceived high debt load if all of these cards were charged up to their full limit.
Now that you have a credit card and / or a student loan, the next thing is to make sure that you meet all of the terms and conditions that you have agreed to when you signed up for these credit items. Each one is different and students need to make sure that you abide by these rules. The worst thing that can happen to ruin your credit rating is for the student to miss a payment on the loan or the monthly payment on the credit card. Suddenly you have a reputation for not paying your loans and your credit rating will start a slippery slide. In addition credit cards charge a high interest rate on any unpaid balance, which can be upwards of 18% to almost 20%.
All student loans are structured differently so it is important to understand the differences. When you graduate some will give you six months grace before payments are required. If you leave your educational institution before you graduate, most student loans become payable immediately. Understanding these nuances and taking the required action can mean the difference between a great credit rating and one that is not.
Your credit rating will affect your ability to get a loan for a car, or for a mortgage on a home when it comes time to make those decisions. In some cases having a bad credit rating, could mean a higher interest rate if your credit rating is not so good. This can end up costing you a great deal of money over the long run as you repay student loans and mortgages. For some people it can mean thousands of dollars in extra cost for those consumers who have less than stellar credit ratings.
Well we hope this little bit if extra information helps, now it is back to the phones.