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Will paying off a chunk of my student loan hurt or help my credit?

New Visitor

Will paying off a chunk of my student loan hurt or help my credit?

Hi there! I graduated earlier this year with (thankfully) only one student loan. I saved quite a bit of money since graduating, and I have around 50% of the total loan cost saved. I was planning on paying off 50% of the loan when my payments begin in January, and then paying around 2.5 monthly payments each month. I was hoping to have my loan paid off in a year since it isn't that big (around $8,000 with interest). 

 

But I am reading that paying off my loan quickly may actually hurt my credit! Just having this loan made me have bad credit, and I have worked my way up to average credit since I graduated. 

 

What should I do? Should I pay off the huge chunk then make large monthly payments or make small monthly payments? I just don't want to have to pay off this loan for 10 years like they want me to! 

Message 1 of 5
4 REPLIES
Valued Contributor

Re: Will paying off a chunk of my student loan hurt or help my credit?

IMO - I would pay this off ASAP.  There are other ways to get your scores in order.


Message 2 of 5
New Contributor

Re: Will paying off a chunk of my student loan hurt or help my credit?

I agree with the other poster.  Pay it off and open a credit card.

 

AAoA may be impacted a bit when you pay it off but you probably aren't sacraficing any payment history since you've likely been in school and not paying

My FICO Scores:
9/17: EQ - 542 / TU - 535 / EX - 506 // Mortgage: 553, 545, 486
10/ 17: EQ - 558 / TU - 563 / EX - 586 // Mortgage: 554, 568, 536
11/17: EQ - 630 / TU - 589 / EX - 614 // Mortgage: 606, 606, 572

Journey Milestones: Completed Federal Student Loan Rehab in Sept 2017. Settled First Premier Bank CC in August 2017. Constant uphill battle with Navient incorrect reporting on seven (7!) private student loans. No TLs listed in delinquency. Obsessively keeping 2 CC UTI @ 7-9% monthly.

End Goal: Pre-Approval for FHA Spring/Summer 2018
Message 3 of 5
Valued Member

Re: Will paying off a chunk of my student loan hurt or help my credit?

I was in a similar situation. Student loans were only about 9,000. I took my time in school so by time I made my third payment the loan was already 5 years old. It is an anchor for my aaoa haha. I was able to talk to my loan provider and I payed a substantial portion of it, lowering my minimum payment but leaving it at what will be over 15 years. I'll pay some extra interest, sure, but I think it's worth it, for me at least.

Message 4 of 5
Member

Re: Will paying off a chunk of my student loan hurt or help my credit?

Yeah no. I’m still learning about credit stuff, but there are so many other ways to build credit. Get rid of the loan and live life with a little less stress!!

Credit Union 500 | Discover it 1500 | Amex BCE 500 | Chase Freedom 1500 | Barclay Apple 1200
Message 5 of 5