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Member
LookingToImproveFICO
Posts: 8
Registered: ‎08-27-2012

Consolidate loans to reduce number of installment accounts on credit report?

Hi all,

 

So I recently obtained my FICO credit score report, and I have one major issue (that's NOT student loan related). However, I did notice something else on the report and am looking for feedback from the "student loan" forums.

 

My report says..."Number of your accounts carrying a balance: 20 accounts"

 

Under the list of accounts, I have the following breakdown:

Open Accounts / Total Number / Accounts with a Balance

Mortgage / 3 / 2

Installment / 13 / 13 <<< ALL STUDENT LOANS

Revolving / 7 / 4

TOTAL / 23 / 19

 

One of the Mortgage accounts will be going away (it's an unused HELOC which I've now closed)...so the mortgage line will look something like this...

Mortgage / 2 / 2

 

On the Installment accounts, ALL 13 accounts are student loans...

12 of the 13 are serviced with "Federal Student Loan Servicing," and balances are as follows:

$18,749.43 is Direct Subsidized

$33,731.86 is Direct Unsubsidized

 

1 of the 13 accounts is serviced by Bank of America (through Great Lakes), and the balance is as follows:

$17,434.77

 

So right now, my student loans are showing up on my credit report as 13 separate "installment" accounts.

 

The FICO credit report I bought says that "FICO High Achievers have an average of 3 credit accounts carrying a balance."

 

So I have two questions:

 

1) Should I consolidate my student loans? (FYI, making the payments in not an issue whatsoever - never been late). If I were to consolidate, it would not be because of a financial hardship, it would be done solely to achieve question 2 below...

 

2) Would consolidating my loans reduce the number of "installment" accounts appearing on my credit report, and if so, would a reducation in the number of installment accounts from 13 to 1 possibly improve my credit score?

Senior Contributor
Walt_K
Posts: 3,065
Registered: ‎11-02-2009

Re: Consolidate loans to reduce number of installment accounts on credit report?

The too many accounts with balances ding is a minor one.  I wouldn't worry about it.  Consolidate your loans if it makes sense financially, e.g., if you can get a better interest rate.


Starting Score: ~500 (12/01/2008)
Current Score: EQ 681 (04/05/13); TU 98 728 (01/06/12), TU 08? 760 (provided by Barclay 1/2/14), TU 04 728 (lender pull 01/12/12); EX 742 (lender pull 01/12/12)
Goal Score: 720


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Valued Member
algorithmslave
Posts: 68
Registered: ‎09-10-2012

Re: Consolidate loans to reduce number of installment accounts on credit report?

I just recently 'consolidated' my student loans with the Special Direct Consolidation....I lost 30 points off the top. (Please note, I am a new member and that hit was with my Equifax consumer account)...I am still taking a hit for to many installment loans. 

You can wrap me in your flag, make me say a praise to your creator and make me spend your currency, but remember this, I am a loyal servant to Justice and a Patriot to none. I am free...
Member
LookingToImproveFICO
Posts: 8
Registered: ‎08-27-2012

Re: Consolidate loans to reduce number of installment accounts on credit report?

So I guess the general consensus is...

 

1) Don't consolidate your student loans unless you're actually able to lower your interest rate, thereby saving you actual money, AND

 

2) Reducing the number in installment loans may actually adversely affect your FICO score.

Valued Contributor
Jazzzy
Posts: 2,678
Registered: ‎07-29-2009

Re: Consolidate loans to reduce number of installment accounts on credit report?

Consolidation did not hurt my FICO at all. I consolidated because I wanted to make only one payment per month. I have it come automatically out of my checking account. I had no desire to keep making all those separate payments. Also, these lenders have been known to make mistakes....I only wanted one lender to have to monitor.

 

As to interest rate, all of my loans were either subsidized or unsubdizided Stafford loans. If I remember correctly, they simply give a weighted average to the rate...so you start out with the same rate overall. Then, however, they gave me a discount for setting up the automatic payment. So...I did get a discount. I consolidated through Direct Loans.

Member
LookingToImproveFICO
Posts: 8
Registered: ‎08-27-2012

Re: Consolidate loans to reduce number of installment accounts on credit report?

@ Jazzzy

 

I'm pretty much in the same boat as you (before you consolidated). All subsidized or unsubsidized Stafford loans. I also get the discount for automatic payment from my bank account.

 

As for number of payments, I only make two (1 for 1 of 13 accounts, and 1 for the other 12 of 13 accounts). The second payment is divvied up amongst the 12 individual loans - and all 12 are serviced by the government directly - they've reported everything correctly thus far.

 

I'm fearful that if I consolidate, that it will actually hurt me and not help me. Basically, I want to turn 13 installment accounts into 1. But is that too few installment accounts on my credit report?

 

 

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Established Contributor
SCF
Posts: 939
Registered: ‎06-09-2008

Re: Consolidate loans to reduce number of installment accounts on credit report?


LookingToImproveFICO wrote:

I'm fearful that if I consolidate, that it will actually hurt me and not help me. Basically, I want to turn 13 installment accounts into 1. But is that too few installment accounts on my credit report?

 

 


The number of installment accounts reporting, and the balances on those accounts has very little impact on your score relative to things like negative payment history, collections, and high CC balances.  You're probably talking about around 10 points either way.

 

Installment loans help by improving your mix of credit (if it's your first/only installment loan), and also by giving you a good payment history.  When you do a consolidation, you will see that "new account" ding, and an inquiry on your report as well (at least I think they do a hard, maybe not though, Federal loans are not based on credit).  But both of those will fade fairly quickly compared to the length of the loan.

 

Do whatever helps you save money and make on-time payments, those are the two biggest wins that will help your credit the most overall.

 

Valued Member
algorithmslave
Posts: 68
Registered: ‎09-10-2012

Re: Consolidate loans to reduce number of installment accounts on credit report?

I was told my student loans capitalize once a month but accural everday and everytime a payment is made, they recalculate the amount accuraled. This makes me wonder if making small daily payments would lower the life of the loan and help me to pay less in the long run. In addition, since the FICO score is not static but calculates daily, I wonder if spreading out the loans with different vendors who report on different days of the month might have the same effect on the score?.?.?

You can wrap me in your flag, make me say a praise to your creator and make me spend your currency, but remember this, I am a loyal servant to Justice and a Patriot to none. I am free...
New Contributor
Sonic98
Posts: 89
Registered: ‎09-04-2012

Re: Consolidate loans to reduce number of installment accounts on credit report?

Yeah deciding whether to consolidate or not can be confusing.  For the majority of time since I left school, my loans were in forbarane or deferment. There were a few months where they were not and I just paid.  Sallie Mae had my loans listed probably 15 times at least on my report. Many of those were listed under the negative accounts portion of my reports with 90 days lates and maybe a 120. They were not in default though.  Some of those months were listed when I should have been in deferment or forbance. I think for one I was acutally taking a year of extra classes after the usual post-graduation grace period ended. I contacted Sallie Mae and sent my informaton to the CRAs, but they would not correct my reports to reflect periods of time I was supposed to be in deferrment that were showing late. That's the only reason I was looking at consolidation, but from what I've been reading there is no real benefit if you're not getting a lower rate.

New Contributor
Sonic98
Posts: 89
Registered: ‎09-04-2012

Re: Consolidate loans to reduce number of installment accounts on credit report?

Yeah that is an interesting idea. I had thought about paying weekly instead of monthly or each paying extra above what the payment is


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