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psy
New Member
psy
Posts: 2
Registered: ‎04-01-2009
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Will Consolidating my student loans affect my credit score?

I asked this in the general credit forum but maybe it would be easier addressed here since no one seemed to have an answer there.

 

I have 2 student loans which are in good standing, always paid on time I have never been late. I recently received an offer to consolidate them which would get me a lower interest rate and lower monthly payments. My question is will this negatively impact my credit rating? I have no problem paying them as they are now but it seems to make sense to take the lower interest rate and smaller payments if it will not be detrimental to my credit. I am looking to buy a house by the end of the year and I don't want to do anything that will lower my score.

 

Thanks

Established Contributor
Tazman81
Posts: 711
Registered: ‎06-23-2010
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Re: Will Consolidating my student loans affect my credit score?

My experience has been that opening any new account, your credit score normally takes a minor hit whenever you open a new account.  My recommendation would be if you have used the MyFICO credit report lately, to go up there and use the report analyzer to see what happens.  Even though you might take a minor ding, you indicate that you are looking at purchasing a home, so the lower monthly installments will surely help out your debt to income ratio which is a major consideration as well with getting a home loan.


Starting Score: Eq: 662 Tu: 532 (03/02/2011) CH7BK 01/12/2009 Discharge
Current Score: Eq: 692 (04/03/2013) Tu: 717 (04/03/2013)
Goal Score: Eq: 720 Tu: 740

Wallet: Chartway Visa 10k | AMEX Costco TE (AU) 25k | Cap One MC 750 | Cap One Visa 750
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trdmlc
Posts: 70
Registered: ‎03-09-2010
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Re: Will Consolidating my student loans affect my credit score?

Will AAoA be affected by closing the old accounts that become consolidated?  My oldest accts are Student Loans, so I don't want to lose that long history that's increasing my AAoA.

 

Thanks,

 


Starting Score LENDER PULLS (02/23/10): 587 (TU) 554 (EQ) 562 (EX)
Current Score LENDER PULLS (07/02/10): 651 (TU) 645 (EQ) 669 (EX)
Goal Score: 700


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Established Contributor
Tazman81
Posts: 711
Registered: ‎06-23-2010
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Re: Will Consolidating my student loans affect my credit score?

No, I don't think it will be affected because these are installment loans, so they will always show the credit history.  They will show as being paid in full since you are consolidating.  I still have some of my oldest Sallie Mae loans showing up on my credit report (with payment history) because I payed them off.  I also have some showing that were sold to the department of education.  They just show as a zero balance.

 

Can anyone else weight in on this as I'm speaking from my own experience.


Starting Score: Eq: 662 Tu: 532 (03/02/2011) CH7BK 01/12/2009 Discharge
Current Score: Eq: 692 (04/03/2013) Tu: 717 (04/03/2013)
Goal Score: Eq: 720 Tu: 740

Wallet: Chartway Visa 10k | AMEX Costco TE (AU) 25k | Cap One MC 750 | Cap One Visa 750
Frequent Contributor
Sommery
Posts: 265
Registered: ‎07-24-2009
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Re: Will Consolidating my student loans affect my credit score?

 If you have 6 accounts total, two are 15 years old, two are 10 years old, and two are 5 your AAoA is 10 yrs. Add one account, at 0 yrs, your AAoA would be 8 1/2 years. Closing accounts does not remove them from the equation. It's not like you would be removing the two 10 year old accounts. If that were the case your AAoA would be 7yrs. - but that's not the case.

New Contributor
trdmlc
Posts: 70
Registered: ‎03-09-2010
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Re: Will Consolidating my student loans affect my credit score?

Thanks for the feedback everybody!!!


Starting Score LENDER PULLS (02/23/10): 587 (TU) 554 (EQ) 562 (EX)
Current Score LENDER PULLS (07/02/10): 651 (TU) 645 (EQ) 669 (EX)
Goal Score: 700


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Established Member
Minato08
Posts: 58
Registered: ‎03-30-2008
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Re: Will Consolidating my student loans affect my credit score?

I'm interested in this topic as well.  I have about 10 student loans.  I wonder if consolidation would be helpful in that it would reduce the number of open loans on my report.  I plan to consolidate later this year, after the deferment period is up, and I'm curious as to how this may effect my score.

Established Contributor
Tazman81
Posts: 711
Registered: ‎06-23-2010
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Re: Will Consolidating my student loans affect my credit score?


Minato08 wrote:

I'm interested in this topic as well.  I have about 10 student loans.  I wonder if consolidation would be helpful in that it would reduce the number of open loans on my report.  I plan to consolidate later this year, after the deferment period is up, and I'm curious as to how this may effect my score.


You will likely see a drop in your score for a little bit because of the change in AAoA.  I do not think that the number of accounts has anything to do with your score because the total balance of accounts will still be the same whether it is on 1 account or on many.


Starting Score: Eq: 662 Tu: 532 (03/02/2011) CH7BK 01/12/2009 Discharge
Current Score: Eq: 692 (04/03/2013) Tu: 717 (04/03/2013)
Goal Score: Eq: 720 Tu: 740

Wallet: Chartway Visa 10k | AMEX Costco TE (AU) 25k | Cap One MC 750 | Cap One Visa 750
Regular Contributor
StartinOver
Posts: 241
Registered: ‎09-08-2007
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Re: Will Consolidating my student loans affect my credit score?

My 2c, for what it is worth (nickel?):

 

I would tend to agree with the comments above about it being installment.

 

I am curious about how you could actually get a lower interest rate, unless these are bank loans. Normally school loans are averaged to obtain a new rate. For example: 1 yr at 6, 1 yr at 7, and one year at 8 would average a consolidated rate at 7.

 

My opinion is that it might affect your score a little which would recover soon. One advantage would be that if you are ever late and have say 7 accounts, that is 7 lates, whereas if there was only one account it is one late. My experience? when unemployed I had 7 90 day lates which will take for ever to not affect me.

 

I will soon change my loans to a different servicer, consolidating about 5 accounts and not the two highest. I will pay off the highest ones first, which have the lowest amounts. Then pay off the rest as consolidation, which have the lowest interest.

 

Just my thoughts, for what it is worth...

4/25/11 FICO: EQ 761....EX 770.....TU 744
3/6/2011 FICO: EQ 710... EX 718... TU 710
09/09 FICO: EQ: 525

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