What many people with a bad credit history do not realize is that your credit score, or FICO score, is not just based on credit card activity. Rather, the final calculation of this figure takes into consideration all lines of credit – including student loans.
These fixed-payment loans must be taken very seriously. Any inability to pay your bill on time reflects very negatively on your score. When you skip a payment, your account is considered delinquent and you are in default, which essentially means that lenders have the right to take legal action against you. Defaulting on a loan leaves a major dent in your credit history – it could remain in reports for up to seven years after the loan is fully paid. For example, if you skip a payment in the first year of your fixed 15-year loan, you will be living with that financial mistake for the next 22 years. If you are having any difficulties making payments, it is important to contact your lender to arrange a solution. They will often adjust the payment schedule to allow for smaller payments over a longer period of time.
One of the best ways to improve your credit is to get a car loan and make your payments on time.