Student Loan Default Can Ruin Your Credit
When you are in college, it can seem like the world is your oyster. Student loan payments are still a thing that you do not have to worry about, and your main focus is simply to have fun while getting a great education. Few students realize that student loan debt is one of the biggest forms of debt in the world, or that defaulting on these loans can start a great deal of harassment by creditors while ruining your credit rating. Your credit is one of the most important things that you have, and keeping up with these loans is crucial.
If you have student loan default on your record, you certainly need to do something about it. Because these debts are considered federal, most mortgage companies are unable to provide financing as long as they remain on your credit report. This means that you will have to work to either get them back into current status or refinance them altogether. The good news is that doing this can greatly improve your credit rating. Bad credit can not only mean that you are denied for financing, it can also mean that you will be denied for employment or housing.
When you refinance your student loan debt, all it takes is a few timely payments to get your credit back on track. When your loans have been paid for a number of consecutive months, the refinancing company will change the status of the original loans to paid. It is important to understand, however, that a consolidation loan does create a new loan on your credit report, and that failing to pay it can create even more chaos for your credit score. The bright side is that consolidating will roll all of your loans into one debt with a single payment and interest rate.
You may also choose to make payment arrangements with your lenders. This can allow you to make payments on each student loan to get it out of default status. When you do this, the negative payment history will still show up on your credit report, but it will change to positive when you are out of default. This will also allow you to qualify for student loans or mortgage loans again. Fixing credit problems can be stressful and can take a great deal of time, but in the long run it is always the best choice you can make.
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