Can Paying Off Student Loans Help Your Credit Score? Not Always

Updated on March 12, 2024

At a Glance

  • Paying off student loans can positively impact credit scores by demonstrating financial responsibility.
  • However, early loan payoff may decrease credit mix and shorten credit history, potentially affecting scores.
  • Refinancing student loans can have varying effects on credit scores but offers debt management and potential credit benefits.

Student loans are a burden that can hang over your head for what feels like a lifetime. But you still slog through the late-night study sessions and the panic-inducing final exams, all in the hope of securing a better future.

After all of that, it’s only natural to think that paying down all of the debt would translate into a positive impact on your credit score. Well, it’s a little more complicated than just a simple “yes” or “no.” 

In this post, we’ll walk you through how paying off your student loans doesn’t always help your credit score and why you should still pay off your student loans (early) anyway. 

Does Paying Off Student Loans Help Your Credit Score?

Here’s the thing – while paying off student loanslike all debtcan have a positive impact on your credit score, it’s not always a guarantee that your credit score won’t be negatively impacted. Unfortunately, credit scores are a bit like weather patterns – they depend on a multitude of factors and can’t always be predicted. Simply paying off your student loans won’t magically lead to a perfect 800 credit score, but it can definitely give it a boost.

Student Loan Payments and Credit Scores

Now, let’s dive a little deeper into the relationship between paying off student loans and your credit score. When you make regular payments on your student loans, it shows lenders that you are responsible and capable of managing debt. This can positively impact your credit score by demonstrating your ability to handle financial obligations.

Additionally, paying off your student loans can lower your overall debt-to-income ratio. This ratio is an important factor that lenders consider when evaluating your creditworthiness. By reducing your debt, you are improving your financial health and increasing your chances of being approved for future loans or credit cards.

Paying off your student loans can also free up extra cash flow in your monthly budget. This newfound financial flexibility can allow you to:

  • Save more
  • Invest 
  • Pursue other financial goals

By managing your finances responsibly, you are setting yourself up for long-term success and stability.

It’s important to note that the impact of paying off student loans on your credit score may vary depending on your individual financial situation. Factors such as your payment history, credit utilization, and the presence of other types of debt can also influence your credit score. So, while paying off your student loans is a positive step, it’s essential to continue practicing good financial habits to maintain and improve your credit score.

That all said, paying off student loans can indeed help your credit score, but it’s not a guarantee for a perfect one. It’s just one piece of the puzzle in building a strong credit history. So, keep making those payments, stay on top of your financial responsibilities, and watch your credit score soar!

Why Paying Off Your Student Loans Early Can Hurt Your Credit Score

Now, here’s where things get a bit tricky. Paying off your student loans ahead of schedule might seem like the responsible thing to do, right? Well, sometimes being too responsible can actually backfire because credit scores love to see a nice mix of credit types on your report.

When it comes to credit scores, variety is the key. Lenders want to see that you can handle different types of credit responsibly. This includes: 

  • Credit cards
  • Mortgages
  • Car loans
  • Student loans

Having a diverse credit mix shows that you can manage different financial obligations simultaneously, which is a positive signal to lenders.

By wiping out your student loans too soon, you might be removing a significant element from your credit mix, and that can send a confusing signal to credit score-generating programs. It’s like taking away one ingredient from a perfectly balanced recipe – the result may not be as satisfying.

Furthermore, paying off your student loans early might also impact the length of your credit history. Your credit history is an important factor in determining your creditworthiness. The longer you have a credit account open and in good standing, the better it reflects on your credit score. By paying off your student loans early, you could be shortening the length of your credit history, potentially lowering your credit score.

So, while it might feel great to wipe out your loans early, your credit score could be worse for it. It’s important to weigh the benefits of paying off your student loans early against the potential impact on your rating. Consider consulting with a financial advisor to determine the best course of action based on your individual circumstances.

Why You Should Still Pay Off Student Loans Early…

In spite of the potential hit to your credit score, paying off your student loans early is still a smart financial move. It frees you from those monthly payments and can save you some a lot of money in interest in the long run. So don’t let your credit score worries overshadow the sense of accomplishment that comes from bidding adieu to your student loans.

Benefits of Paying Off Student Loans Early

When you make the decision to pay off your student loans ahead of schedule, you are taking control of your financial future. By eliminating this debt, you are freeing up your monthly budget to allocate towards other important goals, such as saving for a down payment on a house, starting a business, or even taking that dream vacation you’ve always wanted.

Besides, paying off your student loans early saves you money in the long run. Let’s break it down: 

  • Save Money on Interest: The sooner you pay off the loan, the less interest you’ll end up paying overall. This can result in significant savings, especially if the interest rates on your loans are high.
  • Reduced Financial Stress: Being free from student loan debt can provide a sense of relief and reduce financial anxiety, allowing you to focus on other financial goals.
  • Increased Financial Flexibility: Without monthly loan payments, you’ll have more money available for other purposes, such as saving for retirement, purchasing a home, or investing.
  • Avoid Default: Paying off your student loans early ensures that you don’t risk defaulting on them, which can have severe financial and legal consequences.
  • Enhanced Borrowing Power: Without a student loan on your record, your debt-to-income ratio improves, which might make it easier for you to qualify for mortgages or other types of loans.
  • Peace of Mind: There’s a psychological benefit to being debt-free. Paying off student loans early can give you a sense of accomplishment and a clear mind, knowing you have one less obligation.

Refinancing Student Loans: Improving Credit Health in the Long Run

Refinancing with a personal loan can be a strategic move for helping to save money and pay off your loans faster, especially when considering the implications for your credit score. Here’s what you need to know:

  • Initial Dip, Potential Rise – Initially, refinancing might cause a slight dip in your credit score due to the credit inquiry. However, over time, consistent payments can lead to an improved score.
  • Consolidation Benefits – By consolidating multiple student loans into one personal loan, you’ll have fewer accounts with outstanding balances, which can be favorable for your credit profile.
  • Interest Rate Impact – Securing a lower interest rate means you’re likely to pay off your debt faster, reducing your credit utilization and potentially boosting your score.

The Credit Score Advantages of Refinancing Student Loans

Refinancing isn’t just about managing debt – it’s also about optimizing your credit health. Here’s how:

  • Payment History – Your payment history is a significant factor in your credit score. Lower monthly payments from refinancing can make it easier to pay on time, positively impacting your score.
  • Debt-to-Income Ratio – Refinancing can lead to better loan terms and lower monthly payments, improving your debt-to-income ratio – a factor lenders often consider.
  • Length of Credit History – While refinancing introduces a new loan and can reduce the age of your credit accounts, the benefits of reduced debt can outweigh this in the long run.

Best Personal Loans to Refinance Student Loans

Refinancing a student loan with a personal loan can be a great decision. However, you need to choose reliable loan options to make it work. Here are some alternatives:


Upstart is also beneficial for people with a low credit score. There’s no minimum credit score requirement, so you can refinance without your score being a concern. With Upstart, you can borrow from $1,000 to $50,000 with an APR of 4.60% to 35.99%.

Then, you can pay off the loan from 36 to 60 months. 

Upstart Personal Loan

Stilt’s lender ratings reflect the findings and opinions of our editorial staff. Our scoring methodologies consider a wide array of factors and data points for every lender, offering, and financial solution.
Min. credit score


Fixed APR


Variable APR



  • Minimum credit score: None.
  • Fixed APR: 4.60-35.99%.
  • Loan amounts: $1,000-$50,000.
  • Repayment: 3 or 5 years.


  • Hold U.S. citizenship or possess permanent residency.
  • Be a minimum of 18 years old in the majority of states.
  • Provide a valid email address and Social Security number.
  • Be currently employed full-time or starting a full-time job within the next six months.
  • Maintain an active bank account with a recognizable routing number.
  • Not have declared bankruptcy in the past year.
  • Ensure no delinquencies are present on their current credit reports.
  • Record fewer than six hard credit inquiries in the past six months, excluding inquiries for student, auto, or mortgage loans.


  • Welcomes first-time credit users.
  • Provides quick fund disbursement.
  • Allows flexibility in adjusting payment due dates.
  • Offers pre-qualification through a soft credit inquiry.
  • Customer support available seven days a week.


  • Origination fee may apply.
  • Does not offer joint, co-signed, or secured loan options.
  • Lacks a mobile application for loan management.
  • Limited to two loan repayment terms.


Upgrade is one of the most popular personal loan options. You need a minimum credit score of 600 for their services, which is great if your rating suffers from past financial decisions. The loan’s APR goes from 8.49% to 35.99%, and you will repay the loan over 24 to 48 months.

Upgrade lets you refinance with an amount between $1,000 and $50,000. 

Upgrade Personal Loan

Stilt’s lender ratings reflect the findings and opinions of our editorial staff. Our scoring methodologies consider a wide array of factors and data points for every lender, offering, and financial solution.
Min. credit score


Fixed APR

8.49% - 35.99%

Variable APR



  • Minimum credit score: 560
  • Fixed APR: 8.49% – 35.99%
  • Loan amounts: $1,000 to $50,000
  • Repayment: 3 to 5 years (7 years on some larger loans)


  • Possess an active bank account.
  • Able to provide a legitimate email address.
  • Minimum age requirement: 18 years (19 for Alabama residents).
  • Credit score of 600 or higher.
  • Annual income of $25,000 or more.


  • Willing to accommodate borrowers with a credit score as low as 560.
  • Offers flexibility with a range of loan amounts from $1,000 to $50,000. This can be suitable for both small and large financial needs.
  • Provides options for repayment, allowing borrowers to choose a timeline that best suits their financial situation.
  • Once approved, borrowers can access funds in just one day, which is useful for urgent financial needs.


  • Origination fees can go as high as 9.99%, which might add a significant cost to the loan.
  • Apart from the origination fee, there are fees for late payments and failed payments, which can add up if one is not careful.
  • While there is an option to extend repayment for larger loans up to 7 years, it’s not standard for all loan amounts.


What makes Lending Club such a great option for refinancing a student loan is the fact that it requires no minimum credit score. So, you do not have to worry about not being accepted for refinancing if your credit rating took a blow.

Lending Club lets you refinance for an amount between $1,000 and $40,000, and the terms range from 36 to 60 months. The APR is between 9.57% and 35.99%. 

LendingClub Personal Loan

Stilt’s lender ratings reflect the findings and opinions of our editorial staff. Our scoring methodologies consider a wide array of factors and data points for every lender, offering, and financial solution.
Min. credit score


Fixed APR


Variable APR



  • Minimum credit score: 600.
  • Fixed APR: 9.57-35.99%.
  • Loan amounts: $1,000-$40,000.
  • Repayment: 3 or 5 years.


  • Reside in the U.S. as a citizen, permanent resident, or holder of a valid visa.
  • Be a minimum of 18 years of age in most states.
  • Possess a bank account that can be verified.
  • Required minimum FICO 8 or VantageScore 2.0 credit score: 600. A proprietary scoring system is also in use.
  • Necessary minimum credit history: 3 years and at least two active accounts.
  • Debt-to-income ratio cap: 40%, applicable to both individual and joint loan applications.
  • Annual income prerequisites: None specified, but proof of income is mandatory.


  • Option for joint loans.
  • Debt consolidation loans paid directly to creditors.
  • Soft credit check available for pre-qualification.
  • Flexibility to modify payment due date.
  • Quick fund disbursement.


  • Fee for loan origination.
  • Lack of a mobile app for loan management.
  • Restricted range of loan term durations.

What Will Happen to My Credit Score?

To sum it up, paying off your student loan might cause a temporary dip in your credit score. That’s because when you close an account, it can disrupt the delicate balance of credit factors that contribute to your score. It’s kind of like playing a game of Jenga – pull out one piece, and the whole tower shivers. But once the dust settles, your credit score should bounce back and adjust itself accordingly. Just give it some time to recover.

Timely Student Loan Repayment Is Key

When it comes to your credit score, consistency is the most important aspect to consider. Timely student loan payments and responsible financial behavior are the secret that can help you unlock the doors to a stellar credit score kingdom. 

So, whether you decide to pay off your student loan early or stick to the regular payment schedule, the key is to stay on top of those payments and avoid any slip-ups. Keep calm, be patient, and most importantly, celebrate those victories along the way! Student loans may have their quirks, but with a little financial finesse, you can conquer them and emerge as a credit score champ.

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Frank Gogol

I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.

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