Does consolidating student loans negatively impact FICO score?

[mazinaige]

ilovepizza said that 'consolidation' could be looked upon negatively (Re: I'm A Credit Virgin And I Want It To Be Special) Is this only for credit cards or student loans too?

[GFer]

It does not affect your fico negatively in and of itself. 

You'll see the new student loan tl and the old ones, though. As long as payments were made on time or the loan was deferred until you consolidated, it will report as positive tl(s). I have about 10 listed on mine including the consolidated tl.

But it's just that many more positive tl's on my reports!

[mazinaige]

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@GFer wrote:

You'll see the new student loan tl and the old ones, though. ... I have about 10 listed on mine including the consolidated tl.

But it's just that many more positive tl's on my reports!

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Let me see if I understand this okay, I've been in school for 8 years and have taken out one subsidized and one unsubsidized student loan each year totaling 16 loans. 12 of these loans have variable rates and could be consolidated during my six month out of school grace period between July and December 2009. Once I consolidate, will the loans merge into one consolidated TL or will they still show as 12 TL?

If that is true then I would have 4 fixed rate loans and one consolidated loan totaling 5 TL. Is that correct?

My TU report states: "You have too many credit accounts" (16 all student loans). Do you think in this case, consolidation would reduce the number of accounts and help my FICO score?

[Anonymous]

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@mazinaige wrote:

My TU report states: "You have too many credit accounts" (16 all student loans). Do you think in this case, consolidation would reduce the number of accounts and help my FICO score?

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Does it expand on that message?  Because if you consolidate you will have one new loan, but all the old loans will still be there.  They'll be paid and closed but they'll still be there..  If it said something about too many balances, or too many open accounts, I think consolidating would be more helpful.  And also, your scores are good so it may be to the point where they are reaching for comments.

Do you have any revolving credit lines?  If not, you might look into getting one or a couple.  

But anyway, you might get a ding for a new account bringing down your average age.  This would go away over time and if it makes financial sense to consolidate, I would ignore this point altogether.

[mazinaige]

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@Anonymous wrote:

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@mazinaige wrote:

My TU report states: "You have too many credit accounts" (16 all student loans). Do you think in this case, consolidation would reduce the number of accounts and help my FICO score?

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Does it expand on that message? If it said something about too many balances, or too many open accounts, I think consolidating would be more helpful.

Do you have any revolving credit lines? If not, you might look into getting one or a couple.

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TransUnion left two negative remarks and contradictory solutions.

1. There is no recent activity on your revolving accounts.

Your credit report shows no open revolving accounts or it does not report recent information (such as balance or credit limit) about any of your revolving accounts. Your FICO score evaluates your mix of credit cards, installment loans and mortgages. People who demonstrate responsible use of different types of credit are generally less risky to lenders.

What to do about this: You might want to show new activity on any credit card. If you already have a credit card, you can do this by using it and paying it back on time. If you don't have a credit card, consider opening one. However, be aware that the credit inquiry associated with applying for a new card may lower your FICO score in the short term.

2. You have too many credit accounts.

Your FICO score takes into account the number of accounts (such as credit cards or installment loans) on your credit report. You have a large number of accounts. In general, people who have a large number of accounts pose more risk to lenders than people with a moderate number of accounts.

What to do about this: Avoid opening more credit accounts at this time and as a general rule, if you don't need or plan to use credit, don't apply for it.

I do not have any revolving credit lines. No credit cards at all. I closed all my accounts after my divorce in 2001 and upon leaving the US for graduate school in Canada.

I posted the following related questions on the message board:

• Should I apply for card now or after graduation and employment?

• Should I apply for a credit card before I consolidate my variable rate Stafford loans?