Foreign education loans have a significant impact on the credit scores of borrowers. These loans help students build a diversified portfolio and strengthen their credit length. Additionally, timely payment of study abroad loans enables students to build a positive credit record.
Furthermore, having a diverse mix of credit types. Some of the primary examples are Equated Monthly Installments (EMIs) of student loans and revolving credit such as credit cards. Thus, opting for these credit types enables students to improve their overall credit scores.
In addition, students must ensure that they apply to limited lenders as multiple inquiries within a short period can negatively affect the score. Thus, students must always reach out to credible vendors such as Fly Finance and loan providers like nationalised banks, NBFCs or private banks.
Impact of On-Time Education Loan Payment History on Credit Score
It is important to note that credit scores are determined by multiple factors. But the impact of a foreign education loan on credit score is not solely determined by the loan itself. Other factors are financial behaviours and credit obligations, such as credit card payments, other loans, and overall debt management.
However, the most significant factor in determining credit scores is payment history. Making regular, on-time payments towards the foreign education loan will reflect positively on the student’s credit score. Conversely, missing or late payments can have a negative impact.
Therefore, to maintain a good credit score while repaying an education loan, it’s crucial to make payments on time, manage credit responsibly, and maintain a healthy credit utilization ratio.
Credit Utilization Ratio and Credit Score
Credit utilization refers to the amount of available credit a borrower uses. If a significant portion of the student’s credit is tied up in the education loan, it may increase their credit utilization ratio, which could have a slight negative impact on their credit score. However, as the student pays off the loan, the credit utilization ratio will decrease, potentially improving their credit score.
Stay in tune with Fly Finance News Desk to get timely updates on study abroad loans and international money transfers.
