How to improve your credit score if you've missed student loan payments
NEW YORK (AP) — Millions of Americans are seeing their credit scores drop now that the U.S. government has resumed referring missed student loan payments for debt collection. But there are things you can do to help your score rebound.
Courtney Alev, consumer advocate at Credit Karma, said it's understandable that people have missed payments because of the mixed messages around student loans.
'We're really at a moment of enormous empathy for the consumer,' she said. 'But now it's critical to make a plan."
The U.S. Department of Education paused federal student loan payments in March 2020, offering borrowers relief during the economic chaos of the coronavirus pandemic.
Though payments technically resumed in 2023, the Biden administration provided a one-year grace period that ended in October 2024. Last month, the Trump administration restarted the collection process for outstanding student loans, with plans to seize wages and tax refunds if the loans continue to go unpaid.
According to the Federal Reserve Bank of New York, about 1 in 4 people with federal student loans were more than 90 days behind on payments at the end of March.
How your credit score is calculated
A credit score is a formula that helps lenders determine how likely you are to pay back a loan. Credit scores are based on your history of payments and your credit utilization and range from 300 to 850.
Experian, Equifax and TransUnion, the three main credit bureaus, each have their own model to calculate credit scores.
Factors frequently used to calculate your credit score are:
— Bill payment history
— Length of credit history
— Current unpaid debt
— How much of your available credit you're using (also known as credit utilization)
— New credit requests
— If you have had debt sent to collection, foreclosure, or a bankruptcy
How to check your credit score
Each of the three credit bureaus allow you to check your credit score for free at least once a year, and many banks offer this service as well.
Other companies such as NerdWallet, Credit Karma and WalletHub also offer the service.
How to know if your score is good
A score of 670 or higher is considered 'good.' If your credit score is over 750, that's considered 'great.'
'Fair' credit scores are in the 580-669 range, and a score below 580 is considered 'poor.'
How to improve your credit score if it has dropped
In the first three months of 2025, 2.2 million student loan recipients saw their scores drop by 100 points, and an additional 1 million had drops of 150 points or more, according to the Federal Reserve Bank of New York. The study's authors attribute those changes to loans falling into delinquency, or 90 days or more of nonpayment, which is then reported to credit bureaus.
To avoid those consequences, or to improve your score, the simplest steps include paying at least the monthly minimum payment and setting up auto-pay to make sure payments are never late.
Alev says that it's worthwhile to get into the habit of regularly checking your score, so that you're never surprised by any changes, and you can dispute any errors or negative dips.
'It's important to monitor for mistakes you need to dispute,' she said. 'If you've only missed one payment, or it's your first time missing a payment, you can often call and ask for forgiveness because of a history of solid payments.'
Many borrowers reported that they never received notice from the Department of Education that their student loan payments were resuming, even though they were meant to have been notified at least three weeks in advance. Monitoring your credit score regularly means you can catch any changes before it's too late to correct significant hits.
Other ways to improve your score
Maintaining a steady, low credit usage, known as credit utilization, is another straightforward way to improve your score, Alev said.
'It's kind of a confusing term, but credit usage is key,' she said. 'It's essentially what percentage of your available credit you're currently using. If you have a $10,000 credit limit each month, and you use $2,000, that's a 20% credit utilization. An easy rules of thumb to remember is to keep your utilization below 30%. That's where you see the score impact accelerate.'
Checking your credit score doesn't hurt, for the most part
Checking your credit score doesn't lower it unless you're making a ' hard inquiry,' which is only done when requesting a line of credit.
Soft inquiries, which just let you know your current score, don't affect your score.
When you do apply for a line of credit such as for a mortgage or a car loan, lenders do make 'hard inquiries,' which appear on your report and can affect your credit.
The Associated Press receives support from Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.
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