One of the key factors in determining your interest rate and loan terms when trying to refinance student loans is your credit score. Your credit score can make the difference in potentially hundreds of dollars in monthly payments.

Maintaining an excellent credit score is essential if you want to pay less on your student loans. But many people don’t realize how your credit score is calculated, and what steps they can do to improve it.

Here’s what you need to know about your credit score.

What Is A Credit Score

Your credit score is a number that tells lenders how reliable you are when it comes to paying back your loans. The higher the score, the more reliable you appear to lenders. On the flip side, the lower the score, the more unreliable you appear to lenders.

This matters because when anyone lends you money – be it on a credit card or student loan – the lender is worried that you might not repay them. But if you have a proven track record (i.e. high credit score), the lender can worry less about this.

As such, if you have a high credit score, you are typically rewarded with lower interest rates and better repayment terms, since you’re considered to be more reliable.

Factors That Contribute To Your Credit Score

There are five main factors that contribute to your credit score, but every credit reporting company does calculate things a little different.

These factors include:

  • Payment History
  • Loan Balances
  • Length of Credit History
  • Types of Credit
  • How Much New Credit You’ve Applied For

These factors are also weighted differently, with payment history almost always being weighted much heavier than any other factor.

Payment history is very straight-forward: how many times did you make an on-time payment. If you’ve never been late or missed a payment, you probably have a high credit score. However, just missing one payment can significantly lower your score.

Loan balance simply means how much debt do you currently have. If you are already in a lot of debt, lenders might be scared to loan you more money, because they will be worried about your ability to repay.

The length of your credit history shows how long you’ve been a responsible borrower. The longer, the better. If you’ve only been borrowing money for 6 months, it just doesn’t look as reliable as someone who’s been borrowing money for 10 years.

The types of credit also matter. Having a diverse credit profile is a good thing because it shows lenders that you can manage multiple account types. This means having a credit card, student loan, and maybe a car loan. These different types of accounts can boost your score.

Finally, they look at how often you’re applying for credit. Applying for new credit accounts a lot can raise a red flag to lenders, because they will wonder why you are looking a getting so many new accounts.

Simple Tips To Improve Your Credit Score

If you want to improve your credit, you can do three simple things right now.

First, understand your credit report and make sure it is correct. You can go to and get a free copy of your credit report every year. Having an inaccurate credit report can seriously harm your credit score.

Second, make sure you always make your payments on time. This is the single biggest factor that impacts your credit score, and it’s also one of the easiest to control. Setup online bill pay, or automate the payments some way, so that you are never late.

Finally, keep your loan balances low – or on the decline. Try to pay off your credit cards in full each month, and with loans (such as student loans or car loans) keep the balances decreasing over time.

Please note that the information provided on this website is provided on a general basis and may not apply to your own specific individual needs, goals, financial position, experience, etc. LendKey does not guarantee that the information provided on any third-party website that LendKey offers a hyperlink to is up-to-date and accurate at the time you access it, and LendKey does not guarantee that information provided on such external websites (and this website) is best-suited for your particular circumstances. Therefore, you may want to consult with an expert (financial adviser, school financial aid office, etc.) before making financial decisions that may be discussed on this website.