Cash Advance, Credit Card and Student Loans Are Not The Same Debt

There is always a story about bad debt. Too many cash advances throughout the year, maxed out credit cards and tens of thousands in student loans all bring chaos to an everyday budget. Though credit scores are not affected by the short-term cash advance, the other two do make a difference, both good and bad.

Credit scores are not affected by a cash advance.

Unless a cash advance loan gets sold to a collection’s agent, there will be no credit score evidence that an individual used the service. Credit cards and student loans are logged on the report as soon as the accounts are open. Credit cards are reported as revolving debt, an important factor in determining a credit score. Student loans are listed as installment loans, another important type of credit used to calculate the infamous score. Whereas both types of loans/credit are important factors, how they are managed are deciding factors in the value of the final score.

Student loans are important loans. They offer people the opportunity for a higher education and in turn a more secure job with higher pay. Enter the workforce without a college degree and the job opportunities shrink significantly.  The hard part comes with paying these loans off. Money management is a large part of affordability so know how to stay in control of debt.

• You have graduated from college but have not entered the workforce. Student loan payments typically begin 6 months after schooling ends. If you can show the bank affiliated with the student loan that you are not able to afford the payments, you may qualify for forbearance. The payments will be pushed back for a period of time without any negative repercussions on your credit. This action is a much more positive money management procedure rather than not making the payments.
• Someone fresh out of college may not have had much opportunity to start building their credit. Student loans are one form of installment loan. It is a great way to build or boost credit. The credit bureaus want to see more than just credit cards, revolving credit. Installment loans are set payments over an extended period of time bringing much more positive value to credit scores when managed correctly.
• The federal loan lenders are more forgiving than creditors. Late payments are most often not reported until after the 60 day late mark. Each lender will have their own terms and conditions, but they will typically report in your favor once any delinquencies are corrected. If the account was past due and all payments were made to catch up on the loan, positive reports will be made in a matter of weeks and can almost immediately raise your score.
• If your student account was in default and it is determined that the individual did qualify for the deferment, most federal lenders will go back and correct any backdated negative reports.

You aren’t going to see this kind of service from a cash advance lender or credit card company. In fact, a typical installment loan from a bank will not be as forgiving. It is always important to understand any type of loan or credit prior to using it. Always shop for the competitive interest and find a lender you can work with and trust. Money management is a learned skill, and sometimes it takes a few wrong directions in order to pave the way for financial success.