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To Consolidate Or Not To Consolidate Student Loans

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Anonymous
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To Consolidate Or Not To Consolidate Student Loans

I am considering consolidating my student loans and wonder if this will impact my credit score and how and why it will.  I have asked this question before on the forum but never got a discernable answer.  Maybe I didn't clearly ask the question?

 

So here is the skinny.  I turned to searching the internet and got mixed opinions.  Several sites suggest a real bump in my FICO score with most suggesting 50pts or more depending.  They suggested that the following reasons would factor in as a positive to my score:  1)  Several accounts would show as being paid and since payment history is 35% this would be a big help  2) Reducing the number of accounts from 10 to 1 would be helpful...  they also said some factors would give me a small negative such as 1) Opening a new account shortens the AAoA to which I agree  2) I might have a credit check on my report from the lender depending on the lender of course - not sure about this one since the new loan is not credit based as far as I know.

 

Before answering please consider that I am currently in repayment.  I have a few months worth of repayment on record with no lates or derogs.  The only other reason I am considering consolidation is to possibly reduce my payment by a third so that later when I am ready it can offset some of a new car payment.  I am currently doing fine with the payments as they are otherwise.  Many thanks for a reply Smiley Happy 

Message 1 of 6
5 REPLIES 5
Anonymous
Not applicable

Re: To Consolidate Or Not To Consolidate Student Loans

the impact on your fico score will be minimal.  you may see a slight ding for new credit, but you will quickly recover.

if you consolidate to lower your payments, keep in mind you will be paying more interest over the life of the loan.  on the bright side, you can pay as much as you want over the payment due and reduce the principal, so you have some leeway to decide how much to pay as long as you pay at least the min.

 

IMO the best reason to consolidate is it's easier to deal with just 1 loan account as opposed to mulitple accounts.

miss one payment now and you have 10 lates and 10 accounts with derogs.  consolidate and you only have 1.  

 

also if you shop around for interest rates, you may be able to lower your apr%.

Message 2 of 6
Tazman81
Established Contributor

Re: To Consolidate Or Not To Consolidate Student Loans

+1.  I agree with MD.  As stated, it should be a very minimal impact to your score, but at this point, I would be more concerned with saving the most money verses the score.  You stated one of your goals was to reduce payments, and consolidation should do this for you.


Current Score: Eq: 823 Tu: 830
Goal Score: Eq: 850 Tu: 850

Wallet: PenFed Power Cash 50k | AMEX Blue Cash (AU) 49.5k | Cap One QSMC 26.5k | AMEX Platinum NPSL | USAA Signature Visa 25k
Message 3 of 6
kjm79
Valued Contributor

Re: To Consolidate Or Not To Consolidate Student Loans

I originally started with 4 student loan lines reporting on my CR.  All in 2004 (same year I had a CH 13 BK). 

 

About two months after my loans started reporting, small increase in my score.  At about the same time, Sallie Mae purchased the original 4 loans.  Now I had the original 4 lines reporting as closed, paid or paying as agreed.  I also now had 4 additional lines from Sallie Mae, paid or paying as agreed.  Another small increase in my score.  This is all while I was still in school and not paying a cent. 

 

After finishing school, and before repayment actually kicked in I consolidated the 4 Sallie Mae loans into 1 Sallie Mae loan.  Now I had the original 4 lines reporting as closed, paid or paying as agreed.  I had the 4 lines from Sallie Mae, paid or paying as agreed, and then newly consolidated line.  A total of 9 accounts all listed as positive, paid or paying as agreed accounts.  After the consolidation, I had another bump in my score.  I say between the original loans and the purchase of the original loan and the consolidation, I saw about a 20 point increase.  I'd say definitely consolidate.  As the other posters pointed out, you can save money, you only have to worry about 1 account, and you will most likely see some boost in your score.  Smiley Very Happy


CH 7 Filed 7/27/15 Discharged 11/16/15
Starting Score: EQ 620 TU 568 EX 593
Current Score (07/13/16): EQ 674 TU 649 EX 674 (FICO's 08)
Cap1 QS ($5350) (Combined QS and QS1) Discover It ($4100) MilStar ($8,600) Fingerhut ($800)
Off to the garden 05/01/16
Message 4 of 6
Anonymous
Not applicable

Re: To Consolidate Or Not To Consolidate Student Loans

Consolidating a loan can be a good idea if you have taken out a significant amount of loans and want to save some money. If you do decide to consolidate you should read over this to [Edited] and more about the decision to do so. Hope this helps! Best of luck with everything!


HI there,

 

Unfotunately I had to remove the link you provided. Although the consolidation advice on that site might be helpful there are other links within that site that go to credit repair companies and other commercial sites and providing links to either is prohibited by the forum's Terms of Service and Credit Repair Discussion Guidelines.

 

Thanks for your understanding.

 

-Marinevietvet, myFICO moderator

Message 5 of 6
Anonymous
Not applicable

Re: To Consolidate Or Not To Consolidate Student Loans

Thanks for the advice, I did consolidate and when the new loan reported it was almost a 20 point increase.  My previous 10 student loans have not reported as paid off yet so I am hoping for another boost.  Maybe I will get lucky and see another 20-30 points...xing my fingers LOL

Message 6 of 6
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