How Student Loans Affect Your Credit Score
The first thing to talk about is your credit score as it plays a major role in how your mortgage rate is calculated.
Why is your credit score so important? Because it’s kind of like a report card to help lenders understand how well you manage your money. Someone with good credit is someone who pays their bills on time and probably manages their money well. Someone whose credit isn’t stellar may struggle with money management making them a higher risk for a mortgage.
According to Equifax, several things play a role in your credit score:
- How many accounts do you have
- The types of credit accounts you have
- Used credit vs total available credit
- Payment history
- Length of credit history
Student loans are no different. They are a type of debt that you owe, so lenders definitely consider it as they do the underwriting process of your loan application.
What is considered good credit? We outline the ranges in our mortgage lingo blog post, but in general, you want a score of at least 670.
Student Loans Affect Buying a House, Thanks to a Lower DTI
- A student loan payment of $200 per month
- A car payment of $300 per month
- A mortgage of $1,400 per month
Student Loan Payments Impact Buying a Home Due to Eating your Savings
Do student loans affect your ability to buy a house? Yes – they affect your credit score and DTI, and make it harder to save.
The good news is you can overcome these things! As long as you manage the factors you can control like your credit score and DTI, you will be able to qualify for a mortgage even with student loans.
Have any other questions about how student loans affect mortgages – or any other aspect of the mortgage process? Send me an email at email@example.com or call us at (775) 688-9100 and I’ll reach out as soon as I can.