How to Understand How a Deferred Student Loan will Affect my Credit Rating

Understanding how a deferred student loan will affect your credit rating is key to maintaining good credit. Your credit score will dramatically affect how easily you can get loans of all types and the interest rates that you're charged. Here are some steps in determining how deferring a student loan will alter your credit rating:

Difficulty:

Moderate

Instructions

1. Understand how credit ratings are determined. The three main credit bureaus—Experian, Transunion and Equifax—all figure their ratings a bit differently.

2. Get a copy of your credit report from each agency. You are entitled to one free credit report per year by law. Review your credit reports for inconsistencies and review how your credit was affected for loans dated after deferring your loan.

3. Know what type of student loan you deferred. Different loan programs afford different flexibility on the deferment. Sometimes loan programs require you to pay only the interest on the principal.

4. Contact a loan officer at the financial institution that gave you the student loan. This person's job is to know all this information. A few minutes spent speaking with a professional will give you a much better idea of the particulars of your situation.

5. Get pre-approved for a mortgage. Even if you're not looking for a house or apartment, this costs nothing and will give you a precise idea of how a deferred student loan will affect your credit rating

6. Understand that when applying for a loan, deferment will be included as an expense and may count against you if the payments resume in the first year of the new loan.

Tips & Warnings

• When applying for a mortgage, student loan payments that do not begin in the first year will not be counted as an expense unless the loan amount is very large or your credit is poor.

• There are many agencies that can help you raise your credit rating. Many will charge for their services, but if they are successful in raising your score, that will save you thousands of dollars in interest on other loans in the future.

• Any errors on your credit report must be reported to each of the three credit bureaus for possible removal.