What's better for your credit when paying off installment loans?

[Anonymous]

I'm new to the forums so I hope I'm doing this right! I'd like to apply for a mortgage within the next 12 months and my credit score needs a lot of love. I have 2 credit cards, one retail, and the other I use to pay my bills and then pay off each month. I also have a car lease and my student loans. Despite the loans having one convenient monthly payment, they show on my CR as 10 individual lines of varying open dates, balances, rates, etc.

I had an incident in 2013 after the birth of my first child where my loans came out of forbearance but I thought there were still a few months left. It ended with some 90 and 120+ lates hitting my report on all 10 loans and murdering my score. Impeccable payment history ever since, but that won't fix the damage that has been done.

So here I am with my main question. I have a sum of money equal to half of my total loan balance. My goal with this is to knock my DTI ratio down but I want to do it in a manner that will give my credit score a bump if at all possible. I have seen that FICO high achievers have paid down on average 40% of their installment loans. So, would it be better to take the money and pay off 50% of each individual loan -or- to pay off a few of the highest intrest (also highest balance and newer) lines completely thus closing them out? Does it matter either way? Also, with my late payment incident, how much of an impact is something from 3 years ago still having?

Thanks!

[Anonymous]

Lowering the percentage on installment loans can cause increases in scores some have seen them after getting below seventy percent and then usually after every ten to twenty percentage points there after. These increases are usually not very large I would think that more points would be available from other areas. If you can good will the late payments or remove any other negatives if any off you credit reports would give a larger increase.

[Anonymous]

My loans are through Nelnet and from what I've seen on the forums here, they usually don't budge. I spoke about it with someone on the phone and they got a bit nasty with me so I figured it wouldn't work. Is there another way to go about it?

[Anonymous]

Have you tried or are you able to rehab the student loans?

[Anonymous]

I'm not sure what that is. Can it be done if the account is in good standing?

[righthererightnow]

Write a goodwill letter to your loan providers, tell them your situation. Maybe you have foreberance left, maybe there are other options, or if nothing else maybe the goodwill letter will work by itself. Give that a try, getting just a few of those lates knocked off will really help you.

[Anonymous]

Rehab is only for loans that are currently in default.  Foreberance is for when you cannot currently make payments, and yes, they will retro it, but not 3 years back!  Student loan lates are almost impossible to remove--but some have been successful. I think you would be better served by getting a third credit card--Fico likes at least 3 lines showing, with only one reporting a balance under 10% each month.  SL lates from 3-4 years ago will not keep you from getting a mortgage, but if you can knock out some of the higher interest loans, you will have a better DTI when you apply.