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Valued Member
brentlamb6708
Posts: 25
Registered: ‎01-28-2011
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Student loans and fico score

We are getting prepared to go get pre approved for a mortgage, but need some advice. I have a student loan/career training loan the dispersement amount was 25,500 but the current balance is 29647 due to capitalized interest. I just made a payment to get it down to a balance of 30 dollars. Should I pay it completely off or will it benefit my score more to keep the small balance and pay only 5 dollars a month until we close. All credit card debt is at 2% uti.

Starting Score: 501
Current Score: 2/04/2012 611
Goal Score: 10/01/2012 720


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Valued Contributor
tooleman694
Posts: 2,297
Registered: ‎08-25-2011
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Re: Student loans and fico score

You will probably be in better shape if you just pay it off.

 

Your score probably wont change but your DTI will drop.

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Revelate
Posts: 9,765
Registered: ‎12-30-2011
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Re: Student loans and fico score

[ Edited ]

tooleman694 wrote:

You will probably be in better shape if you just pay it off.

 

Your score probably wont change but your DTI will drop.


Correct me if I'm mistaken in this, but I read something a while back that stated if your loan (we were discussing an auto loan in that case) was under 10 months left to go, that it wouldn't be factored into DTI at all?  

 

If that's the case (and admittedly it's a big if) I'd stretch that tradeline out as long as possible.

 

Starting Score: EQ 561, TU 567, EX 599* (12/30/11, EX lender pull 12/29/11)
Current Score: EQ 04 673, EQ 8 707, TU 720, EX 702* (09/02/14, EX older)
Goal Score: 700 on EQ '04 (01/01/15)


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Valued Member
brentlamb6708
Posts: 25
Registered: ‎01-28-2011
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Re: Student loans and fico score

There is no way it would be factored in my dti, the payment was 393/mo the most it could account for was the 30 dollar balance. I'm mostly wanting to know will leaving the tradeline active till I close help me more or have the account paid. I'm only concerned with which will produce the highest score.

Starting Score: 501
Current Score: 2/04/2012 611
Goal Score: 10/01/2012 720


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Moderator
Revelate
Posts: 9,765
Registered: ‎12-30-2011
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Re: Student loans and fico score


brentlamb6708 wrote:
There is no way it would be factored in my dti, the payment was 393/mo the most it could account for was the 30 dollar balance. I'm mostly wanting to know will leaving the tradeline active till I close help me more or have the account paid. I'm only concerned with which will produce the highest score.

Typically leaving it open is better anecdotally: several individuals have reported a drop in their FICO score (albeit minor) without having two open installment tradelines.

 

Also I'd make the point that longer tradelines are better tradelines, and it prevents the 10 year clock for the positive tradeline post-closure from starting until you actually close the loan.  While admittedly Student Loans aren't likely nearly as high quality as some other installment tradelines, any positive history is a good thing in my opinion and as far as FICO goes too, so it's worth keeping open as long as you can without affecting you financially... which in this case the interest on the current balance is laughably small, and that's a small price to pay for even a marginally better credit profile in the future.

Starting Score: EQ 561, TU 567, EX 599* (12/30/11, EX lender pull 12/29/11)
Current Score: EQ 04 673, EQ 8 707, TU 720, EX 702* (09/02/14, EX older)
Goal Score: 700 on EQ '04 (01/01/15)


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Valued Member
brentlamb6708
Posts: 25
Registered: ‎01-28-2011
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Re: Student loans and fico score

Thanks for the help ill repost the score differences once I close pay it off, if there is any.

Starting Score: 501
Current Score: 2/04/2012 611
Goal Score: 10/01/2012 720


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Valued Contributor
MovingForward_2012
Posts: 3,406
Registered: ‎12-19-2012
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Re: Student loans and fico score

Yep. I would leave it open as long as you can as it is your oldest open account.
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Valued Contributor
JM-AM
Posts: 3,302
Registered: ‎06-09-2010
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Re: Student loans and fico score

The problem I see with leaving the account open at this point, is many Lenders have a minimum payment on different types of loans based on balances.

 

Good Chances the account if not paid in full will accrue additional interest charges, maybe additional fees, and possibly make it delinquent.

 

Since there is less then 10 months left on the loan it would not be factored into your DTI anyway.

 

I see no point in holding onto an installment loan, such as school loan for scoring purposes. The scoring impact would not be beneficial in my opinion. If there are changes in your scores in my opinion they would be minimal, if anything at all.

Good Luck
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