01-31-2014 10:05 PM
If anyone would be willing to take a look at my current situation and give me some advice, I would very much appreciate it. My current objective it to build my credit score as well as my credit profile beyond just my score. I would like to make my self as attractive to lenders as possible. Short term goals are to have more revolving credit extended to me, and intermediate are to get a prime rate on my next auto purchase in a year or so and be in a position to buy my first house a few years past that. I know that in general it is always best to repay student loans as quickly as possible. However, I will likely be able to stay in deferment for the next 2 years if I choose to.
The back story:
I work full time and am about a year into a two year associates degree program at a tech school. This particular program is a fairly hefty course load and most people even working just a part time job complete it in 2-3 years. I am taking my current job/career very seriously right now and just can't quite pull off taking a full course load. I am trying my best to maintain a 2/3 course load or so which realistically puts me being in school for another 2 years. I had to borrow money to get the ball rolling and finally return to school as an at the time paycheck to paycheck 22 year old. I currently have a federally subsidized loan to the tune of $5,500. My money situation is getting better with my current job and I am doing better every month.
Finances and Credit:
Takehome = 1,500-2,000
Current Fico score = 617
No negs other than inquiries
1 credit card - Secured with a $300 limit
1 student loan - $5,500 (In deferment)
1 auto loan - $7,300 (only about a week old, not reporting yet)
What is going to report best, increase my score the quickest, and make me look the best to lenders? I am only assuming that early repayment will begin positive reporting. Should I stay in deferment and focus on building my credit in other areas? Should I come out of deferment and start paying my minimum monthly payment which off the top of my head I believe is by default going to be around $75 per month. Should I come out of deferment and start making 2x,3x,4x, or even more payments. Should I throw lump sums at the balance as I have the funds?
I just don't want to start contributing large amounts of my income to this debt that "really isn't hurting anything" at the moment, if I don't stand to gain from doing so.
02-01-2014 10:37 AM
A student loan in deferment reports much the same as a loan in repayment - you are "paying as agreed" so the deferment has no real impact on your score. You have a subsidized loan, which is great, you're paying no interest, so I would just leave well enough alone there for the moment. If you want, and are able to, be ready to pay the loan off quickly when you graduate, that's also great - I would start setting aside money for that purpose. Put it in a savings account and hold on to it, that will it will be available to you to pay down that loan when you graduate, or maybe to handle an emergency, or make a down payment on your car if your priorities or needs change in the next few years.
How old is your secured card? Let your auto loan report and your card age. I'd sign up for CreditKarma or another FACO site to help you track when inquiries fall off and you reach milestones for AAoA. Then, when everything has 6 months - 1 year of good payment history, apply for another card. If you have no negatives on your report, you should be able to get something quite nice. You could also try sooner for a "student" card of some sort, they are usually quite forgiving for people with thin credit files like yours (aka the typical student).