What To Do When You Have Student Loans And Bad Credit

By Victoria Robertson on August 24, 2015

This is a terrible situation to be in, but it certainly isn’t going to be the end of the world. When you’ve taken out student loans, it’s going to affect your credit, whether you want it to or not.

So that begs the question: what do I do if I’ve got piles of student loans and have bad credit?

Well, first of all, your student loans are something you’re going to be paying off for a while, so they definitely aren’t going to disappear overnight. So making the monthly payments on these (and maybe putting in a little extra cash here and there) is going to not only help you pay down the loan, but it’s going to build your credit. If you let these payments slip, continuously paying late or not paying at all, your credit is going to take a plunge, so you’ll definitely want to keep up with that.

But rather than letting loans pull your credit down, there are also other ways (aside from paying monthly loan payments on time) that will help you build your credit back up.

For one thing, you should (if you haven’t already) apply for a credit card. For students, I recommend the Discover It card. Everything you need is online, so you can see your monthly statements, keep track of your credit score (something you’re attempting to increase), and even get cash back on certain spending habits.

The Discover It card has no fees attached, and it’s a great way to build your credit. Of course, there are other credit cards that are great as well, so look into which card you think is best for you.

However, as I’m sure many people have told you before, credit cards can be dangerous. So here are a few tips to make sure you don’t drown in your credit card debt.

1. Don’t spend money you don’t have.

While credit cards are great in that you can do this, this is the most dangerous way to spend, and a surefire way to put you in debt.

If you don’t have the money, don’t spend it. Instead, use the card to make smaller purchases, then pay back the full amount as soon as the purchase goes through. This way, you’re building your credit, but not putting yourself into debt.

2. Stay on top of it.

Make yourself a monthly budget, mark your payment dates on a calendar, pay off your purchases right away – do whatever it takes to stay on top of your credit card payments.

The second you let this slip, you’re in trouble. Rather than building credit, you’ll be letting it slip, which is the opposite of what you want to be doing.

3. Choose wisely.

My final suggestion, however: don’t apply for store credit cards. Macy’s, Victoria’s Secret, Kohls – they all have high interest rates and many of them have strings attached such as hidden fees, etc.

So research your credit card before you apply, and know the company inside and out. While it may seem like it, this isn’t something to be taken lightly, and the more effort you put into looking at it, the better off you’ll be.

Credit card talk aside, one of the most effective ways to build credit, and one that many people overlook, is through car payments.

Most graduating students will need a car anyway, and while most interest rates will be fairly high (especially for those with bad credit), this is a fantastic way to build credit.

Of course, it’s also dangerous. One missed/late car payment can and will bring down your credit score, so if you choose to go this route, stay on top of those payments. Again, mark due dates on your calendar and send your payments in with enough time for them to be processed. Also, paying a little extra here and there helps, and again will bring down your overall payment a little quicker.

The truth is that bad credit isn’t the end of the world, as there are always ways to revive it. So keep these tips in mind, and research some more ways to build your credit, as this is something you will actively have to do: it isn’t going to fix itself overnight.

So pay off those loans, look into getting a credit card, and keep up on all insurance/car payments that you have, as these are surefire ways to build that credit back up to a number you’re a bit more comfortable with.

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