- US. Tax Day 2025 payment: What are the options for people who owe taxes on their return?
- US. Chapter 30 VA Benefits: How much do you get monthly for a 1/2-time enrollment?
Eliminating your student loan debt is a major financial milestone, and beyond the relief it can bring, it can also impact your credit score. Whether that impact is positive or only slightly neutral depends on how you've handled the loan over time and the overall makeup of your credit profile.
For many borrowers, the act of paying off a student loan helps strengthen their financial standing and unlocks opportunities for better borrowing power in the future.
A major part of this benefit comes from your payment history-the single most influential factor in most credit scoring models, including FICO.
If you've been making on-time payments consistently, you're laying down a strong credit foundation. Once your student loans are paid off, those years of timely payments will still work in your favor.
A paid-off student loan lowers debt but could slightly impact credit mix
When you pay off an installment loan like student debt, you're also reducing your total outstanding debt, which may improve your creditworthiness in the eyes of lenders.
This is especially important for borrowers juggling other financial obligations such as credit card balances, auto loans, or personal loans. Lower debt amounts tend to reflect positively on your credit utilization rate-even though student loans themselves aren't factored into revolving credit utilization, they still affect your overall financial profile.
Additionally, by removing that student loan from your monthly financial responsibilities, you improve your debt-to-income ratio (DTI).
While DTI doesn't directly affect your credit score, it is a major factor lenders use to evaluate your ability to manage new debt-such as qualifying for a mortgage or refinancing another loan.
However, there may be a small, short-lived dip in your credit score after your loan is paid off. That's because installment loans like student debt contribute to your credit mix-a category that s for roughly 10 percent of your credit score.
If your student loan was your only installment , closing it could reduce the diversity of your credit portfolio, which in turn may cause a slight decline in your score.
That said, the decrease is often minor and temporary, and it doesn't outweigh the long-term benefits of being debt-free.