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Valued Member
AQ
Posts: 76
Registered: ‎02-28-2013
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Re: How does paying before statement build credit?

That is precisely my concern. I will have student loans of exceptional amounts and will be looking for work in the public-service (non profit) sector.  There's public service loan forgiveness, which I don't expect to last long enough for anyone to utlize it (I think that might have been the plan in the first place), but the Pay As You Earn, as well as the 15% discretionary income of the Income-Based Repayment Plan will not be enough to cover interest for many of us.  The fed will pay the remainder of the interest for the first three years, but after that...

As it stands, I have interest acruing on my unsubsidized loans and that's creating a higher balance.  I'm not in a position to be paying that interest off, too, but I might need to.  Then again, idk how much that really hurts or not.  If anything, I would think lenders would look at student loan situations with more consideration.  My girlfriend is buying a house that she'll close on in a week or two.  She has about a $30k/year income, probably about $30k in student loans and credit score well under 700 and they had no problem approving her for a mortgage.  I think her interest is in the low to mid 3% on an FHA.  My student loans are already a bit above hers though and, although my credit score isn't too much lower, I have a lot of baddies.  Still, something to aspire to--getting a house, that is.



Starting Score: TU 641 2/28/13 EQ 640 3/1/13
Current Score: TU663 EQ661
Goal Score: 750 750




Regular Contributor
loviedovie
Posts: 206
Registered: ‎12-20-2012
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Re: How does paying before statement build credit?


AQ wrote:

That is precisely my concern. I will have student loans of exceptional amounts and will be looking for work in the public-service (non profit) sector.  There's public service loan forgiveness, which I don't expect to last long enough for anyone to utlize it (I think that might have been the plan in the first place), but the Pay As You Earn, as well as the 15% discretionary income of the Income-Based Repayment Plan will not be enough to cover interest for many of us.  The fed will pay the remainder of the interest for the first three years, but after that...

As it stands, I have interest acruing on my unsubsidized loans and that's creating a higher balance.  I'm not in a position to be paying that interest off, too, but I might need to.  Then again, idk how much that really hurts or not.  If anything, I would think lenders would look at student loan situations with more consideration.  My girlfriend is buying a house that she'll close on in a week or two.  She has about a $30k/year income, probably about $30k in student loans and credit score well under 700 and they had no problem approving her for a mortgage.  I think her interest is in the low to mid 3% on an FHA.  My student loans are already a bit above hers though and, although my credit score isn't too much lower, I have a lot of baddies.  Still, something to aspire to--getting a house, that is.


Really you think PSLF won't be around for much longer? It has been around for decades... Also I would think that with Pay As You Earn or IBR your credit report would benefit from showing that even if you are carrying several hundred thousand in debt, your payment is capped at 10 or 15% of your income and all accounts are reporting "pays as agreed" every month. It shows that you can carry a heavy loan burden very responsibly.  At least that's what I have been told... 


Starting Score: EXP 615 | TU 610 | EQ 635
Current Score: EXP 719 (lender pull 10/15) | TU 707 | EQ 700 (lender pull 10/25)
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Senior Contributor
Open123
Posts: 4,089
Registered: ‎02-23-2011
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Re: How does paying before statement build credit?


loviedovie wrote:

Just curious, I know the right way to do it per forum consensus is pay every card off in full each month before the statement cuts. How then does it report that I am using/building "credit" when really I am just using my credit card as a debit card?


It helps utility when you have lower limits during a building or rebuilding stage.

 

For instance, if you have $2K CL, leaving a balance of $1,000 would be 50%.  To maintain score integrity, you pay it before it reports to keep the reported utility low.  When higher limits are attained or with a charge card, you can ignore this.

Valued Member
AQ
Posts: 76
Registered: ‎02-28-2013
0

Re: How does paying before statement build credit?

No, I think PSLF, as it is now, is going bye-bye.  PSLF is now situated such that if you make 10 years of on-time payments under an approved plan on eligible loans, if you are employed full time (30 plus hours, I think) at a 501(c)3 or whatever they are called, you can have your loans forgiven. Prior to this, it was only particular jobs that qualified, perhaps teacher positions or select fields.  Now it's pretty much any public service job, regardless of what you do, so long as it's not religious work.  You can work for a religious non profit, just can't be preaching and counting those conversion hours at the expense of the taxpayer.  

The first rounds of the current PSLF will not occur until 2017, because 10 years of payments must be made from the date at which the new loans are eligible.  We'll see if anyone gets them under this.  It's a great incentive, especially for people who are already planning on doing that kind of work. 

http://www.studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/public-service



Starting Score: TU 641 2/28/13 EQ 640 3/1/13
Current Score: TU663 EQ661
Goal Score: 750 750




Regular Contributor
loviedovie
Posts: 206
Registered: ‎12-20-2012
0

Re: How does paying before statement build credit?

Yeah but do you have any indication of this from anywhere or is this just a hunch on your part? I talk to the fedloan people all the time and I haven't heard any plan of this changing...


Starting Score: EXP 615 | TU 610 | EQ 635
Current Score: EXP 719 (lender pull 10/15) | TU 707 | EQ 700 (lender pull 10/25)
Goal Score: 740
Valued Member
AQ
Posts: 76
Registered: ‎02-28-2013
0

Re: How does paying before statement build credit?

I hope you're right about carrying the loan burden.  That, I feel I can do, so long as we keep the IBR.  I won't be eligible for Pay As You Earn, since some of my loans are prior to 2007, thus not a "new borrower."  I was just worried about the interest growing faster than the debt coming down. 



Starting Score: TU 641 2/28/13 EQ 640 3/1/13
Current Score: TU663 EQ661
Goal Score: 750 750




Valued Member
AQ
Posts: 76
Registered: ‎02-28-2013
0

Re: How does paying before statement build credit?

Oh no, pure opinion.  And I hope, hope, hope it sticks around.  But, if it does, there may be an awful lot of forgiven student loan debt, which is great, in my opinion.  But some politicians seem to like the idea of bailing out private sector and saying "you're on your own, kid" to people struggling to make hefty and on-going student loan payments.  Romney, for instance, was (if I recall correctly) wanting to change IBR and make it more restrictive, or at least repeal what had been changed under Obama--maybe the Pay As You Earn.  It's a new program and we haven't seen it take effect yet.  There are also no requirements that they have to keep it.  It's just my opinion that it won't last long.  I really hope it does though, as I'd love to be out from under my loans after ten years than after 25, as would my girlfriend. 

I think one of the plusses about keeping it around is that government employees qualify for it, so they are protecting their own.  But, it could be amended.  I mean, right now, based on how the information reads, you could be pushing a mop at a local charity full time and pay $50/month on your $150,000 student loan debt and get forgiveness after 10 years of payments, while the government writes off the rest.  It's also been suggested people could use this plan to take out excessive debt and pursue more degrees because, ultimately, if they are planning on staying in relatively love-paying non profit jobs, they'll never be fully responsible for the majority of their debt.  If I have $150k in student loans, but am only making $25k per year, my requirement payment is not much more than $100, if that.  If I have a dependent, that much less.  If I'm OK with not making much money (which I am, personally) if I know or believe this will stay around, I could discharge well over $100,000 of loan debt ten years after graduation.  Why not pick up that extra masters degree?  :smileyhappy:



Starting Score: TU 641 2/28/13 EQ 640 3/1/13
Current Score: TU663 EQ661
Goal Score: 750 750





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