How does refinancing a student loan affect credit? – Lexington Law

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

If you’re considering refinancing a student loan, you need to have answers to all of your questions. For starters, does refinancing student loans affect credit? Fortunately, student loan refinancing doesn’t have to negatively affect your credit, but you need to know how to go about the process carefully and fully informed. Since refinancing comes with several benefits, it’s nice to know that you can consider this option without it killing your credit. 

What is a student loan refinance?

Student loans can come from two sources: federal funding and private funding. Federal student loans come with some benefits, such as subsidized interest while you’re in school and the potential to apply for a loan forgiveness program.

Unfortunately, you can’t refinance a federal student loan with the government. Refinancing is always done through a private lender. While going to a private lender may sound scary, refinancing can save you money. 

When you refinance, you take your student loan(s) to a lender and negotiate a better interest rate or a more manageable monthly payment. This can help you save thousands during the life of your loan, but how much money you save depends on a number of factors—such as fees for refinancing, the decrease in interest rate and the length of your new repayment term. 

Protect your credit during a student loan refinance

Credit inquiries and missed or late payments are the two factors that might impact your credit when you go through student loan refinancing. But if you’re careful, you can minimize the damage done to your score during a refinance.

Credit inquiries

When you initially approach a lender about refinancing, they’ll conduct a soft inquiry on your credit to see if you’re eligible. However, once you officially apply with a lender for a refinance, there will be a hard check on your credit. A hard inquiry can lower your credit score by a few points.

These few points are easy to recover if you continue to be responsible with your credit. But if you have multiple hard inquiries within a relatively short period of time, your credit score may drop significantly—potentially up to 10 points per credit inquiry. 

To avoid this situation, try to submit as few applications as possible. To be clear, that doesn’t mean you shouldn’t compare your options. It’s in your best interest to approach several lenders to see who can offer you the best terms and lowest interest rate. You can still shop around and compare lenders—just don’t fully apply with every lender.

Lenders should be able to give you a good idea of your options when they pull a soft inquiry on your credit. Let your lenders know you’re comparing rates so they’ll begin to offer you more competitive terms. 

In addition, most credit bureaus have a 14 to 45 day “shopping period.” If you have multiple hard inquiries within this time frame, a credit bureau may count it as only one inquiry. Whenever possible, try to keep your inquiries to this small window of time, ideally ranging between two and four weeks.


Your student loans are tied to your credit. Every time you miss or make a late payment, it negatively impacts your credit history and your credit score. If you’re considering refinancing, you must make all your payments on both your past loan and your refinanced loan until you’re absolutely certain the previous loan has ended. After you know the transfer is complete, you can make payments on the refinanced loan only. 

When should you refinance?

When it comes to refinancing a student loan, timing can be everything. For this process to be worth it, you need to have a decent credit score and a stable income. These two factors will ensure that when you go to lenders for refinancing, they’ll offer you a lower interest rate than the one you currently have. 

Two downsides of refinancing a student loan

Refinancing isn’t the best choice for everyone, and there are two main downsides you should know about. 

Your interest rate might not decrease by much

Student loan interest rates have remained relatively low in recent years. This means private lenders don’t have much leeway and may not be able to offer you an interest rate that’s much lower. 

That being said, even a small decrease in interest can make a significant difference over the lifetime of a loan. For example, let’s say you had a $30,000 student loan with a 10-year payment period. Your initial loan interest is five percent, and a refinancing lender offers to lower your interest to four percent. A one percent difference may not sound like a lot, but it’ll save you $1,736 in interest over 10 years. 

One thing to note is to take into account any fees for refinancing when comparing your loans. If your refinance lender is charging you a $200 sign-up fee, that will eat into your savings. 

You’ll lose access to benefits of federal funding

You can only refinance with a private lender, which opts you out of any benefits of federal funding. If you opt out of federal student loans, you lose access to federal repayment options such as the income-driven repayment plan. 

You also lose the ability to apply for federal loan forgiveness programs. Several federal loan forgiveness programs for candidates such as teachers, military service members and public servants may forgive a portion or all of a loan under specific conditions. These programs are often difficult to qualify for, but it may be worth sticking to it if you were already on this path. 

Who shouldn’t refinance

If you have poor credit or unstable income, you’ll likely be denied refinancing or get an interest rate that isn’t better than your current interest rate. If this is the case for you, focus on improving your credit score and reapply for refinancing later on. 

Additionally, people who are close to the end of their loan term typically won’t see any benefit from refinancing. If you’re almost done paying off your student loan, simply focus on getting to your end goal. 

Is refinancing the best option for you?

Ultimately, the decision to refinance should be made on a case-by-case basis. You need to weigh all the pros and cons of refinancing before making a decision.

A useful tool when evaluating refinancing is a loan calculator. These online calculators help you determine just how much you can save if you refinance a loan. Don’t forget to subtract any fees from your savings to depict your actual savings accurately. 

Your student loan will impact your credit for many years to come, and your credit has a long-reaching impact on other areas of your life. Whether you refinance or continue with your regular student loan, make sure you build responsible habits with your loan repayment. Sign up for auto-pay, make additional payments if you can and track your progress. 

Reviewed by Cynthia Thaxton, Lexington Law Firm Attorney. Written by Lexington Law.

Cynthia Thaxton has been with Lexington Law Firm since 2014. She attended The College of William and Mary in Williamsburg, Virginia where she graduated summa cum laude with a degree in International Relations and a minor in Arabic. Cynthia then attended law school at George Mason University School of Law, where she served as Senior Articles Editor of the George Mason Law Review and graduated cum laude. Cynthia is licensed to practice law in Utah and North Carolina.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.


2021 Consumer Debt Statistics

man checking debt

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Total consumer debt amongst Americans rose 4.7 percent and hit just below $4.2 trillion in September 2020, according to the Federal Reserve. Collectively, Americans owe 10 percent of their disposable income to non-mortgage debts like car loans, credit card accounts and student or personal loans. 

Americans have been amassing more and more debt since 2013—although disposable income has increased as well. Though income is increasing, American consumers are borrowing more money more often. 

What’s causing these changes in behavior? Recent studies have shown that Americans are losing their financial literacy at an alarming rate. These studies, which cover topics like basic finance and investment, show that Americans lack fundamental knowledge in these areas. Perhaps that explains the marked uptick in consumer borrowing. 

To dive further into consumer debt and learn how to properly manage it, let’s first understand exactly what it is and how it works in our financial systems.

What is consumer debt?

Consumer debt is personal debt owed by an individual to another entity, typically a bank or credit union. Consumer debt often involves household purchases and transactions independent of a business or government operation. It does not include debts owed by a business or corporation to another entity.

These purchases are typically consumable and include items that do not depreciate in value. Purchases like this allow consumers to better themselves through a purchase without the requirement of paying the full purchase price up front. For example, consumer debt may come in the form of auto or student loans.

Also referred to as credit debt, there are typically two types of consumer debt: revolving and non-revolving.

Revolving Consumer Debt

The most common example of this type of consumer debt is credit card debt. This kind of debt is referred to as revolving because it is meant to be paid off frequently, typically within a month. Federal Reserve fluctuates with consumer use and usually comes with a variable interest rate.

Non-revolving Consumer Debt

Conversely, non-revolving consumer debt is not on a particular payment schedule. Instead, payments may be seen as “fixed” and are usually active for the life of the underlying asset. This type of consumer debt may include long-term loans for cars and education. These debts typically include a fixed payment plan with few changes to the amount charged. It is possible for consumers to choose between fixed and variable interest rates for these debts in some cases.

Consumer Debt Statistics

consumer debt chart

The following statistics come from the Federal Reserve’s Consumer Credit G.19 release:

  • Total consumer debt totaled $4.161 trillion in September 2020, increasing a total of 4.7%.
  • Average consumer debt per capita is approximately $12,596 (total consumer debt as of September 2020/total US population as of September 30, 2020).
  • Total revolving consumer debt was $989 billion in September 2020.
  • Total revolving consumer debt saw a huge drop of 30.8% in Q2 of 2020
  • Despite the drop in Q2, total revolving consumer debt rose 4.8% in September 2020.
  • Average revolving debt per capita is approximately $2,992 (total consumer debt as of September 2020/total US population as of September 30, 2020).
  • Total non-revolving consumer debt was $3.173 trillion in September 2020.
  • Total non-revolving consumer debt increased by 4.6% in September 2020.
  • Student loans totaled $1.7 trillion in September 2020.
  • Auto loans totaled $1.223 trillion in September 2020.
  • Average loans per student equal approximately $86,075 (total student loans in September 2020/total students enrolled in public and private universities in 2020)*

*Total enrollment based on a 2020 projection of students in public or private universities

student loan debt total $1.7 trillion in 2020

  • One in ten adults says they carry a credit card balance over $5,000. [Source: NBC]
  • The average credit card balance per person in May 2020 was $5,338, which was a 14% drop from the beginning of the year. [Source: Experian]
  • The average personal loan debt reached $16,257, which was a 2% increase from the start of the year. [Source: Experian]
  • 75% of consumers who have a credit card have a balance over $6,200. [Source: Experian]

Barring two recessions and the economic impact of COVID-19, consumer debt has increased steadily over time, with minor drops in 2020. It is possible that total consumer debt may break four trillion dollars within the next decade.

If you’re unsure how to begin tackling your personal debt, there are many available resources to help you. Paying your monthly fees on time and maintaining your credit can also help you reduce your loan amounts over time.

You can also start up a conversation on our social media channels. Like and follow and interact with us on Facebook, Instagram, and Twitter.


Public Records on Credit Reports – Lexington Law

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

If you’ve ever looked at your credit report, you’ve probably noticed a section called “public records.” These are entries that are also on file with local, county, state or federal courts. Keep reading to learn more about which public records appear on credit reports.

What Are Public Records?

Public records are documents or pieces of information that are not considered confidential. Some examples include arrest records, marriage certificates and some court records. These are records that other people or entities could look up about you, as the information isn’t private or protected.

In the context of your credit report, historically, only three types of entries were public records: tax liens, civil judgments and bankruptcies. Now, only bankruptcies should show up as a public record on an individual’s credit report.

The Public Record Entries

First, it’s essential to understand the three types of public record entries that can impact your credit report.

A tax lien is a law-imposed lien upon property for the payment of taxes. Typically, a tax lien occurs when a person fails to pay taxes owed on property (personal and other), income taxes or other forms of taxes.

A civil judgment is a legal ruling against a defendant in a court of law. It refers to a judgment on a noncriminal legal matter and often requires the defendant to pay monetary damages.

Bankruptcy is a legal process in which people or other entities who cannot repay debts to creditors try to seek relief from some or all of their debts. In most jurisdictions, bankruptcy is usually imposed by a court and is often initiated by the debtor.

Understanding the Updated Public Record Policy

In 2017, the National Consumer Assistance Plan (NCAP) went into effect and changed how data is collected for civil judgments and tax liens before these entries appear as public records on credit reports. The act was initially launched in 2015 by the three major credit bureaus to modify credit reporting rules and set stricter standards. These new standards would ensure that the data found on credit reports are more accurate and up to date.

There are two primary ways this act affects how credit bureaus obtain and report tax lien and court judgment data on consumer credit reports. First, for either of these types of entries to appear on a credit report, the public record must contain a person’s:

  • Name
  • Address
  • Social Security number or date of birth

This standard applies to both new and existing records that are already on credit reports.

Secondly, public records reported on credit reports must be checked by the credit bureaus for updates every 90 days to ensure their accuracy. If the records are not checked, they should be removed from the credit report.

Bankruptcy records already hold these strict requirements, which is why the changes don’t impact this type of public record. However, many tax liens and civil judgments do not uphold these standards, in large part due to different standards of record-keeping at various courthouses.

This higher standard for public records is estimated to have positively impacted millions of US consumers. As this change applies to public records that were already on credit reports before the NCAP, it’s essential to review your personal credit reports to see if any public records are still being shown. Generally, tax liens and civil judgments shouldn’t be on your credit reports anymore.

By 2017, almost half of all tax liens and civil judgments were removed from consumer credit reports, and by April 2018, the three credit bureaus had removed all tax liens from credit reports. Currently, the only type of public record that should be present on your credit report is a bankruptcy.

Not a Permanent Change

It’s crucial to note that tax liens and civil judgments might not stay off credit reports forever. This is because reporting on them isn’t illegal and the credit bureaus only promised to remove them for a time. This could change sometime in the future, so you still want to avoid incurring these types of public records if possible.

How Do Public Records Affect Your Credit?

Typically, when a public record is added to your report, it’s considered a negative item. That’s because most public records on credit reports stem from a debt or financial delinquency. Therefore, it will usually lower your credit score.


A bankruptcy can remain on your credit report for seven to 10 years.

If you go through a Chapter 13 bankruptcy, you must repay a portion of the money you borrowed. This type of bankruptcy has a shorter impact on your credit report (seven years) because you paid some of the money back.

Under a Chapter 7 bankruptcy, the individual doesn’t pay any of their debts back. This type of bankruptcy will remain on your credit report for up to 10 years.

Bankruptcy will have a devastating impact on your credit, lowering it by anywhere from 130 to 200 points.

It is difficult to rebuild credit after a bankruptcy filing, but not impossible. For example, while you may not be approved for a regular credit card, you can start with a secured credit card. You will still have financial options available to you.

Tax Liens and Judgments

The Consumer Data Industry Association revealed that the changes showed “only modest credit scoring impacts” on consumer reports. Still, millions of Americans had public records wiped from their reports, which was beneficial overall.

While these two types of entries may not be on reports anymore, they can still affect your finances and life in general. For example, a judgment can impact your ability to qualify for a loan or credit. Lenders may check to see if you have outstanding judgments and reject your application. Similarly, the presence of a tax lien may cause a lender to reconsider your application.

What Can You Do About Public Records on Your Credit Report?

If bankruptcy is on your credit report, and all the information is accurate, you can’t do very much to remove it from the account. However, if the bankruptcy data is incorrect, you can file a dispute.

For tax liens and civil judgments, file a dispute to remove these public records from your credit report. You can contact each of the three major credit bureaus by phone or email and ask them to remove the public records from your file.

For more detailed information on how to remove a tax lien, check out this blog post. And for step-by-step instructions on removing a civil judgment from your credit report, refer to this resource.

It’s essential you check your credit report regularly so you can note when new data appears on your report. If a negative item appears and it’s inaccurate, you should dispute it quickly, before it can significantly impact your credit score.

Your Credit Can Recover From Derogatory Marks

Having derogatory marks on your credit report is not a life sentence. With sound financial behaviors, your credit score can recover. You’ll need to make payments on time, get rid of debts and maintain a good credit utilization ratio. If you don’t know where to start, consider credit repair services.

Lexington Law knows how to spot incorrect data on your credit reports and give you helpful credit tips. Credit repair takes time, so it’s essential you start today.

Reviewed by John Heath, Directing Attorney of Lexington Law Firm. Written by Lexington Law.

Born and raised in Salt Lake City, John Heath earned his BA from the University of Utah and his Juris Doctor from Ohio Northern University. John has been the Directing Attorney of Lexington Law Firm since 2004. The firm focuses primarily on consumer credit report repair, but also practices family law, criminal law, general consumer litigation and collection defense on behalf of consumer debtors. John is admitted to practice law in Utah, Colorado, Washington D. C., Georgia, Texas and New York.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.


How to Increase Your Credit Score with a Secured Credit Card

Building Credit with Secured Credit CardA good credit history means good rates on loans and other credit facilities. Once damaged though, rebuilding your credit can be difficult. However, you can get started by using a secured credit card that is easier to acquire than most other lines of credit. In this post, we shall look at how to increase your credit score with a secured credit card.

Difference between a Secured and Unsecured Credit Card

Unsecured credit cards are the common type and only require a look at your credit history for approval. When your credit history is not favorable, your lender may issue you with a secured credit card.

Unlike the former, instead of referring to your financial history, secured credit cards require you to deposit collateral. The amount of your security deposit determines what your credit limit will be. And in case you default on your payments, the issuer uses your deposit to recoup their money.

How to Increase Your Score Using a Secured Credit Card

Building your credit score is all about using your available credit smartly. Here is how:

1)   Only use what you can settle monthly

A secured credit card allows you to show lenders that you can be financially responsible. The easiest way of doing this is by making small purchases and settling your bills in full by the end of every month. In doing so, your payment history, which accounts for 35% of your FICO Score, improves.

Additionally, whenever possible, pay more than the required minimum to ensure that your balance remains low. The reason being, beyond showing that you can handle your finances properly, your credit utilization ratio (CUR) will reduce.

30% of your credit score is derived from this ratio, which is calculated as your debt divided by your credit limit.

Also, by being timely with your payments and paying over the minimum, you keep off from paying hefty interests on your credit purchases.

2)   Make several payments per month

Your lenders continually send your financial reports periodically to the three credit bureaus; TransUnion, Equifax, and Experian.

However, financial institutions and lenders are not obligated to inform you when they send your report. So, you could be making payments at the end of the month while they submit reports mid-month. As such, your credit repayment record may be affected negatively.

Keep this effect at a minimum by making multiple payments in the course of the month. This will ensure that your balance is strategically low. For the same reason, after large purchases, ensure that you send money to your credit account.

3)   Go for a low interest Secured credit card

Building credit starts with striving to repay what you owe. This can be hampered by getting a card with high-interest rates. Make meeting your card obligations easy by shopping for a card with low interest.

Typically, credit unions offer better deals on cards than banks. Also, go for cards with something extra to offer. Apart from the basic features, apply for cards with standout features like cashback rewards and larger limits than your security deposit.

4)   Choose the right card

None of the above will work if your card issuer does not report card activities to the credit bureaus. What you need to understand is that unlike other savings accounts or debit accounts, not all secured credit card issuers submit reports. So, before you apply for a card, ensure that your account usage will be reported.

The Bottomline

Secured credit cards can present you with a new chance to grow your credit. But just like other cards, they are prone to misuse. The trick is in shopping for the best deals and using the card diligently: Do not max out the card, carry a balance, or get more cards than you can manage.


Increasing Your Savings on a Low-Income Salary

A low-income salary can create challenges when it comes to reaching your financial goals. You may want to take a vacation, buy a new car, or just put some cash away for a rainy day, but how can you do that with a limited income? Although you may struggle to add to your savings, there […]

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6 Credit Card Tips to Help Prepare for the Holidays

Is it too soon to start planning your end-of-year holiday events? That may be debatable but we all know how quick retailers are to taking advantage of increased sales brought on by holiday shoppers. With Thanksgiving just around the corner most retailers are already advertising for their big shopping events and Black Friday deals. If […]

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