Main Content

How Credit Reporting Works

Learn how credit affects your student loan options

If you’ve ever bought a new car or house—or even opened a new credit card or rented an apartment—you’ve probably been asked to provide information so that the lender or landlord can run a credit report.

A credit report is a record of your financial transactions. It includes a history of your bills and loans and when you’ve paid them as well as how much debt you currently have. This report is generated by organizations called national credit bureaus. Each month, lenders report your loans—and their status—to these credit bureaus to update your credit report.

Get more information and advice on how to protect your credit score at

Does comparison shopping hurt your credit score?

Many folks believe that if they shop around for loans, every inquiry into their credit will have a negative impact on their credit score. Not so.

While the FICO scoring formula does take student loan comparison shopping into account, loan shopping during a certain timeframe (30 days is a good rule of thumb, though this can vary), generally will have little to no effect on your credit score. With that said, it's considered good practice to do some comparison shopping before you apply. 

For a more comprehensive discussion of rate-shopping and inquiries, click here.

How Credit Affects Your Student Loan Options

When you apply to take out a new loan—such as a VSAC Student & Parent Loan —your lender uses your credit report to determine how likely it is you’ll pay that loan back on time. And that helps the lender decide how risky it is to loan you the money.

If your report says you have a manageable amount of debt and you pay your bills on time, you’ll be considered a good credit risk—and you may get a better interest rate or a lower fee on your loan. On the flip side, if your report shows you have a large amount of debt or you don’t pay your bills on time, the lender will see you as a bad credit risk. Your student loan may be denied—or you may be charged a higher interest rate and possibly an additional fee.

How On-Time Student Loan Payments Can Lead to a Strong Credit Score

Making your student loan payments on time each month can help you build a strong credit score. And that’s important if you want to borrow money in the future—especially if you don’t have a credit card or other loans that you can use to show your responsibility in paying back your debt.

Time and consistency are 2 of the most important factors in building a credit score. Because student loans are paid each month—usually over many years—they can be a great way to show you’re responsible in paying your bills consistently over time.

To make sure you’re paying on time every month, you may want to set up an automatic monthly payment.  Review your payment options for VSAC loans

How Late Student Loan Payments Can Lead to Bad Credit

Once you have your student or parent loan, you’ll want to make sure to make your payments on time. When you make late payments on your student loan, this gets noted on your credit report—which may affect your options for other loans for a house, car, or other large purchases in the future.

Don’t let yourself fall into a bad credit situation. If you need help repaying your student loans, we’re here to help guide you. Learn more about student loan repayment options >

How to Keep an Eye on Your Credit

You can get 1 free credit report from each of the 3 national credit bureaus each year. Vermont residents may also request a second report, under Vermont state law.

You can request a copy of your report by going to or by contacting each of the credit bureaus individually:

You can find additional guidance on money and credit issues at the following websites: