Does Paying Tuition Affect Your Credit Score?

If you’re a college student, you might be wondering, does paying tuition affect your credit score, or does paying your tuition late hurt your credit. This post provides you with everything you need to know about how paying tuition or failing to pay affects your credit score.

Does Paying Tuition Affect Your Credit Score?

No, paying tuition does not affect your credit score because tuition payments are not reported to the credit reporting bureaus. Therefore, they do not appear on your credit report nor do they impact your credit score. Although paid tuition does not improve your credit, if you do not pay your tuition, your unpaid tuition could be sold to a collection agency, causing a collection account to appear on your credit report, causing significant damage to your credit.

So, now that you know that paying your school or college tuition has no effect on your credit score, does failing to pay your tuition affect your credit score?

The answer is yes, failing to pay your college tuition can cause damage to your credit, but the damage is not caused directly by failing to pay your tuition, but because of the collection account that can be added to your credit report by a collection agency.

Typically, if you fail to pay your college tuition, your university or college may task a collection agency with the collection of the outstanding tuition.

If you fail to pay the collection agency, the collection agency can add a collection account to your credit report, significantly lowering your credit score.

A single collection account can lower your credit score by 100 or more points, and it remains on your credit card for 7 years from the date you missed your tuition payment.

After the 7 year period, the collection account will automatically be removed from your credit report, no longer affecting your credit score.

That said, when a collection account is first added to your credit report, it will have a huge negative impact on your credit score. That said, as the collection account ages, its impact on your credit score lessens until it’s ultimately removed from your credit report.

In addition to the negative effects associated with a collection being added to your credit report, if you fail to pay your tuition, you should keep in mind that your college can restrict access to your diploma, transcripts, and other academic records until you’ve paid the amount you owe. If you’re still a college student, you may be denied the ability to register for classes, classes you’re currently enrolled in may be dropped, and if you’re on a student visa, your visa may be revoked.

What Should You Do To Stop Unpaid Tuition From Affecting Your Credit Score?

So, now you know that unpaid tuition can result in your account being sent to collections, here are some things that you should do to pay your tuition and avoid it from negatively impacting your credit score.

If you’re having difficulty paying your tuition, you should not ignore paying your tuition and hope that it resolves itself because chances are it will not, and you will just complicate the situation.

Instead, you should contact your financial aid office because they can provide you with a variety of options including applying for student loans, finding scholarships, or jobs that can help you pay for tuition. They will also advise you as to important dates by which you must make payments to avoid having your tuition bill from being sent to collections.

In the event that you go to your school’s financial aid office and still cannot pay your tuition, there may be some other options available to you.

For example, you could ask your family or close friends for tuition money, seek out scholarship opportunities outside of your schools, applying for federal student loans, going to a private bank for student loans, or applying for a personal loan to cover your tuition.

That said, obtaining federal student loans is significantly easier than obtaining student loans from private banks.

This is so because private banks are stricter than the federal government when it comes to providing students with student loans.

In fact, if you’re a student and you have not yet built your credit, it will be difficult to qualify for a private student loan without a parent or close friend cosigning your student loan application with you.

What Should You Do If Your Tuition Has Been Sent to Collections?

If your tuition account has been sent to collections, you should not ignore the letters and phone calls you’re receiving from the collection agency. Answering the phone or responding to a collection notice as soon as you receive it can help you in some circumstances to avoid having a collection account added to your credit report. The process of collecting the debt does not hurt your credit, it’s only when the collection account is reported to the credit bureaus and added to your credit report that it causes damage to your credit.

That said, responding to the collection agency may help you avoid having a collection account added to your credit report. That said, if you do contact the collection agency, don’t agree to anything via phone call or email. Only ask them about what debt they’re trying to collect and the amount owed. Ask them about your options for repaying the debt.

If they offer you the ability to repay a significantly lower amount and you’re comfortable paying that amount, then maybe it makes sense to pay it to avoid having a collection account added to your credit report.

If a collection account has already been added to your credit report, you may have noticed a significant drop in your credit score. A large drop is typical if a collection account has been added to your credit report. The higher your credit score, the bigger the drop will be.

So, if a collection account has been added to your credit report, you should try negotiating with the collection agency to remove the account from your credit report in exchange for a full or partial payment.

You should negotiate before paying the collection account because that’s when you have leverage. Some collection agencies are willing to perform pay-for-delete deals where they will remove the collection account in exchange for payment.

That said, if the collection agency you’re dealing with refuses to remove the collection account, you should be aware that paying a collection account does not remove it from your credit report. In fact, a paid and unpaid collection account affect your credit score the same. So, paying does not fix the damage to your credit.

Even if you pay a collection account, it will remain on your credit report for 7 years from the date you missed your tuition payment. After the 7 year period, the collection account will automatically be removed from your credit report.

So, negotiate with the collection agency and ask them to remove the collection account in exchange for payment if you’re able to do so.

Does Paying Tuition Late Affect Your Credit Score?

No, paying tuition late will not affect your credit score because tuition payments are not reported to the credit bureaus, and therefore they do not appear on your credit report. That said, if you’re very late on paying your tuition, your university or college may have tasked a collection agency with collecting your tuition. If this happens, the collection agency can cause significant damage to your credit by adding a collection account to your credit report.

Frequently Asked Questions (FAQs)

1. What happens if I don’t pay my tuition?

If you don’t pay your tuition, your missed tuition payments do not impact your credit because late payments are not reported to the credit reporting bureaus. That said, your school may task a collection agency with collecting the unpaid tuition from you. This could cause a collection account to appear on your credit report and cause significant damage to your credit.

2. Do late payments on student loans affect your credit?

Yes, late payments on student loans can cause significant damage to your credit because student loan payments are reported to the credit reporting bureaus. So, missing a payment will cause a late payment notation to appear on your credit report, causing a significant drop in your credit score. So, make sure to make your student loan payments on time. If you are having difficulty making your student loan payments, you should contact your student loan service provider for alternatives, such as postponing payments or reducing your monthly payment.

3. How long do late payments on student loans affect credit score?

Late payments on student loans will remain on your credit report for 7 years from the date you missed your payment. After the 7 year period, the late payment is removed from your credit report, and will no longer bring down your credit score. Removal of the payment is automatic after the 7 year period.

4. Does paying tuition improve credit?

No, paying tuition does not improve your credit because tuition payments are not reported to the credit bureaus.

5. Do late tuition payments hurt your credit score?

No, late tuition payments are not reported to the credit bureaus, so they will not directly hurt your credit score. However, if you’re extremely late, your institution of higher education may task a collection agency with collecting the tuition. Collection agencies can cause significant damage to your credit if they add a collection account to your credit report.