Student loan borrowers getting a break on their payments right now are seeing an additional benefit. Their credit scores are going up.
The average credit score of all student loan borrowers increased from 647 in March to 656 in June, according to a report from the Federal Bank of New York.
Student loans can typically have a significant impact on your credit score if you have a lot of this debt, but your payment history accounts for the biggest part of your credit score.
It's important to remember this pause on payments is only until the end of the year, currently.
You need to prepare now for when those payments will start again and using a higher credit score now could help.
“As your score improves, if that's the case, to shop around and move other high interest debt into lower interest rate accounts, if you're qualifying for those,” said Bruce McClary with the National Foundation for Credit Counseling.
It's not just student loan debt people are figuring out how to manage. The average person working with a nonprofit credit counseling agency right now is coming in with $16,000 in credit card debt spread across five credit cards. That's up from last year.
“There's this insular bubble right now that's still relatively intact that's keeping people a float,” said McClary. “What we're fully expecting is when that ends, when that comes to a screeching halt, if the current situation with unemployment doesn't improve much more, there's going to be a floodtide of demand for the services that we're offering.”
If your student loan payments are on hold, make sure you're checking your credit score regularly.
Credit counseling experts say it's not widespread, but they have been seeing some issues of payments not being reported correctly.
You can check for free weekly at AnnualCreditReport.com.
