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Super Contributor
Posts: 6,122
Registered: ‎09-18-2007
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What is the effect of paying down student loans on scores

In the fico simulator, I did not see any score increases when used pay down student loan. Is there any score increase if we paydown the student loan debt?

Established Contributor
Posts: 794
Registered: ‎06-23-2010
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Re: What is the effect of paying down student loans on scores

Impact is not any different than other installment loans.  The payment history is what is most important.  You can see a small fluctuation by paying down your balance in contrast to the amount you originally borrowed.  It works similar to the way credit card utilization works, but is typically a low impact.

 

Other than Fico, paying down your balance faster saves you money in the long run with less interest and/or compounding interest.


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Super Contributor
Posts: 6,122
Registered: ‎09-18-2007

Re: What is the effect of paying down student loans on scores

So is student loan is considered as another installment loan for the credit score purposes? If we do not have other installment loans then student loan can be used as an installment loan for the credit scoring purposes?

Established Contributor
Posts: 794
Registered: ‎06-23-2010

Re: What is the effect of paying down student loans on scores

Yes, that is correct; it is an installment loan on your credit.  So after you pay it off, it will remain on your credit report for 10 years.


Starting Score: Eq: 662 Tu: 532 (03/02/2011) CH7BK 01/12/2009 Discharge
Current Score: Eq: 712 (02/03/2017) Tu: 717 (04/03/2013)
Goal Score: Eq: 760 Tu: 760

Wallet: Chartway Visa 12.5k | AMEX Blue Cash (AU) 49.5k | Cap One QSMC 12.5k | Cap One QSVisa 11k | LFCU Visa 11k
Super Contributor
Posts: 6,122
Registered: ‎09-18-2007
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Re: What is the effect of paying down student loans on scores


Tazman81 wrote:

Yes, that is correct; it is an installment loan on your credit.  So after you pay it off, it will remain on your credit report for 10 years.


So technically I can keep student loan for next few years and use it as my installment loan for the credit mix. With large amount of loan it will take some time to pay it off any way. Once it is paid off will it still help for the credit scoring purposes ?

Valued Contributor
Posts: 1,235
Registered: ‎06-30-2016
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Re: What is the effect of paying down student loans on scores

[ Edited ]

concorduser wrote:

Tazman81 wrote:

Yes, that is correct; it is an installment loan on your credit.  So after you pay it off, it will remain on your credit report for 10 years.


So technically I can keep student loan for next few years and use it as my installment loan for the credit mix. With large amount of loan it will take some time to pay it off any way. Once it is paid off will it still help for the credit scoring purposes ?


Yes, but if you CAN pay it, you should. You can get a shared secured loan to replace it and it won't cost you as much money. 

 

Also, there's some speculation that student loans weigh lower than other installment loans.


EX08 659 EQ08 660 TU08 695 Starting: mid 300'sGoal: 700
Super Contributor
Posts: 6,122
Registered: ‎09-18-2007
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Re: What is the effect of paying down student loans on scores


Yes, but if you CAN pay it, you should. You can get a shared secured loan to replace it and it won't cost you as much money. 

 

Also, there's some speculation that student loans weigh lower than other installment loans.


Thanks.I am planning on paying off the student loan after all the high interest credit cards are paid off. I have a car loan and paid off 95% of the loan and keeping it alive with 5% balance until the full loan term to pay off the balance. I can always add another car loan in the future if necessary. For next 24 months I want to focus on brining the balances down and avoid adding new credit accounts to catch up with the scores.

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Valued Contributor
Posts: 1,235
Registered: ‎06-30-2016
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Re: What is the effect of paying down student loans on scores

[ Edited ]

concorduser wrote:

Yes, but if you CAN pay it, you should. You can get a shared secured loan to replace it and it won't cost you as much money. 

 

Also, there's some speculation that student loans weigh lower than other installment loans.


Thanks.I am planning on paying off the student loan after all the high interest credit cards are paid off. I have a car loan and paid off 95% of the loan and keeping it alive with 5% balance until the full loan term to pay off the balance. I can always add another car loan in the future if necessary. For next 24 months I want to focus on brining the balances down and avoid adding new credit accounts to catch up with the scores.


Sounds good.

 

Don't feel the need to get another car loan. A shared secured loan is just an installment loan secured by collateral in a savings account. You can pay down to 10% and let it ride the remainder of the loan period for the installment loan boost. ^_^


EX08 659 EQ08 660 TU08 695 Starting: mid 300'sGoal: 700

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