Do student loans affect your credit score?

Sep 24, 2022

Every year, an eye-watering £20 billion in student loans is released to 1.5 million students in England. That leaves students with an average debt of £45k before they’ve even started their career.

It’s a daunting amount, especially at a young age. But does your student loan have any impact on your credit rating?

It’s important to remember that student finance works differently to other loans.
Read on to find out more about student loans and how they affect your credit score or mortgage applications.


What is a student loan?

A student loan is funding you can borrow to pay university tuition fees and living costs.
With annual undergraduate fees usually exceeding £9,000 and a rising cost of living, going to university is getting increasingly expensive.

As a result, paying tuition and maintenance without some sort of support is out of reach for most people. That’s where a student loan comes in.


Who is eligible for a student loan?

To be eligible for an undergraduate student loan, you must be studying on a full-time course at a recognised university or college.

You must also be a UK national or have settled status, and have lived in the UK for three years prior to your studies. 


What does a student loan cover?

Your loan is split to cover both your tuition and maintenance (living costs). Tuition goes directly to your university.

Your maintenance loan is means tested against your household (often the earnings of parents or guardians).
This will dictate how much you are eligible to borrow, and whether you qualify for any additional grants.


How do you repay a student loan?

When you start earning above a certain amount each year, you’ll need to start paying back your student loan. If you’re an employee, payments are usually taken from your wages in the same way as your tax and National Insurance contributions. If you’re self-employed, you’ll pay it as part of your self-assessment payment.

How much you pay back and when you start payments depends on when you started your course. Undergraduate loans that were taken out after September 2012 fall under Plan 2, which means you currently start paying them back when you’re earning more than £524 a week (before tax).

You then pay 9% of whatever you earn over that amount. For example, if you earn £700, you pay 9% of £176 (the difference between your income and the threshold), which works out at £15.84 per week. To find out more, check the Government website.


Do student loans affect your credit score?

The simple answer is no! Student loans do not appear on your credit report and therefore do not directly affect your credit score.
So, it’s possible to leave uni with a large student loan debt but still have a good credit rating. Phew! 

The repayments are based on your income, so they’re more manageable than other forms of lending.
If you find yourself unemployed for a period, or if your salary falls below the threshold, your repayments are frozen. So as long as you keep up your student loan repayments when they are required, you won’t see any detrimental effect to your credit rating.

But that’s not the end of the story. Your student finance can still have positive and negative impacts on your credit score. Let’s dig into the things you want to watch out for. 


Do student loans affect mortgage applications?

Although your student loan does not appear on your credit report, when you apply for a mortgage the lender will want to perform an affordability check on you as well as look at your credit score. This is where they look at your income and outgoings to make sure that you will be able to afford the mortgage repayments. 

If you have no student loan, your outgoings might be smaller than somebody who is making monthly repayments.
But lenders don’t always look at the student loans deductions in your paycheque as a negative.

It’s not an exact science, but they will often assume that student loans will often be attached to people with higher paying jobs. However, if you have a low income, a poor credit score and you are paying off a student loan, you may be declined for a mortgage.


Do student loans help your credit score?

We’ve mentioned that your student loan won’t appear on your credit report, so it won’t help or hinder your credit score in a direct way. But there are other ways your spending as a student may have helped to boost your score.

It is important to remember that to lenders, no credit history can be viewed the same as having a bad credit score. You want to demonstrate that you can borrow money and repay it responsibly. 

During your studies, if you ever used a different form of debt to help you get by financially (i.e. took out a personal loan with the bank, used an arranged overdraft or credit card), these forms of debt could be used to help your credit score. As long as you handle credit like this responsibly (meaning making your payments on time, every time) you can build a history of good debt.


What is my credit score?

If you’re thinking about getting a credit card, applying for a mortgage or borrowing for a big purchase, but you’re worried that your student days have had an impact on your credit file — make a start by checking out what your credit score is now. 

You can check your credit score for free and without hurting it, using one of these services:


ClearScore (uses Equifax data)*


Credit Club (uses Experian data)


Intuit Credit Karma (uses TransUnion data)


*Just a heads up. If you sign up for ClearScore using this link, we receive a little commission. 

Can I improve my credit score?

There are lots of ways you can improve your credit score. You might want to check out our tips and advice on how to improve your credit score. But for a proven way to grow your credit score with all three credit reference agencies (CRAs - Experian, Equifax and TransUnion) you should get started with Loqbox.

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