paying before graduation

[Anonymous]

I'm a freshman in college and have zero credit history. My question is if I pay 25-50 a month toward the student loans I took out will it start to give me a score? and if so how long will that take to report?  

[Anonymous]

Im not completely sure about the credit score thing until you answer some questions.

1) Private or government student loan?

2) and if government SL was it subsudizied or unsubsudized ? Im sure I spelled that wrong... lol.... (all that college and I still cant spell!... its my weakness.. lol.)

[Anonymous]

Right now I have 3500 in federal subsidized loans and 6000 in unsubsidized.

[Anonymous]

From my experience and understanding is this:

If you take out a student loan through the government.  There is a monthly payment each month (that appears on your credit report... not a REAL monthly payment until graduation), but the difference is that the GOVERNMENT makes that "fake" showing of a payment on your credit report for you until you graduate. So, if you were to make a payment, it wouldnt really do anything to your subsidizied loan (since the govnt is paying the interest and showing that there is a "payment" even though there really hasnt been a payment (because you signed a contract stating that you WOULD pay it back, so the government is giving you the benifit of the doubt that you WILL pay back your loan, so it shows good history, until you graduate or stop school, and dont start paying.

(since you are only talking about 20 bucks here... Its really not going to make a huge dent in your loan.. and you could be SAVING that 20 and earning interest on it in the bank! HUUUUMMMM!!!??

But in reguards to the UNSUBSIDIZIED loan... Now.. you are responsible for the interest on THAT loan... So, if you dont want the amount of that loan to increase, then once a month make an interest only payment.  I think that should have been a question that your financial aid officer asked you.  "Do you want to make interest only payments on just your unsubsidizied loan?".  Now, THAT would benefit you.

As far as the building credit thing.  The only advice I can give is to get a SMALL credit card with a small credit limit, use it, but pay it off EVERY MONTH. And, please listen to me on this one, because this is how they got me! After a few months of great payment, they will want to raise your credit limit, now this is good and bad. Dont let them let you have TOO much... Someone in college has no need for a credit limit above $1000.  If they try and raise it above that, dont let them tempt you. Write a letter to them stating that you appricate the increase but you do not want it, and you would like to keep your balance at the limit it is now, ask them instead to give you a better interest rate.

Little story. I was young and STUPID and had a credit card and it had a 1000 limit.. I payed it off monthly, they raised me to 3000, then to 5000, then to 10000 (I kid you not!)..., A college student , waiting tables, had a 10000 limit! CRAZY! Well, needless to say, the temptation of that huge limit finally got me, and got me in some huge financial trouble.  Be carefull, those credit agencies dont care about you at all and will do whatever they can to trap you!

BEST OF LUCK!!!

I hope that helped! 

[SCF]

Hey aubrey,

Since you are still in school, your federal loans should be on an "in school deferment."  This does not keep them from reporting to the CRAs, and in fact, you should have a TL (one for each loan you took out) that shows that you are in deferment and "Paying as Agreed."  Being in deferment does not affect your FICO score, so these loans are already doing you some good.

With the unsubsidized loan, I belive you can make interest only payments while you are in school to prevent interest from accruing (and being added to the loan principal) when you graduate.  If you can afford to do this, its a great idea to make those interest payments each month.  If you go to the financial aid officer for your school, you can ask them about how to set this up and find out how much your monthly interest payments would be.

Hope that helps! 

ETA:

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If you take out a student loan through the government.  There is a monthly payment each month (that appears on your credit report... not a REAL monthly payment until graduation), but the difference is that the GOVERNMENT makes that "fake" showing of a payment on your credit report for you until you graduate. 

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This is not a "fake payment" by the government, but a report from your lender that you are "Paying as Agreed," which, during the deferment, means you aren't paying anything (it is what you and the lender agreed to after all).

Message Edited by SCF on 01-18-2009 01:43 PM

[Anonymous]

Ahhhhh! You put it so much nicer than I do... lol.

I knew, from experience with loans in that time, that it wasnt bad, and showed that there was a "payment" for each month that I was in school and not making payments. So... thats a good thing!

But the official name for that time (in school) is "deferment"?? I thought that "deferment" is bad or looks bad.. or something like that.  Or are there different types of deferment?

[SCF]

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@Anonymous wrote:

But the official name for that time (in school) is "deferment"?? Yes

I thought that "deferment" is bad or looks bad.. or something like that. No, deferments don't affect your FICO score, and they don't look bad as long as you can explain them under manual review.  I suppose that if you were still in deferment 10 years out of school and making $100k a year, it might raise some red flags, but it wouldn't be possible to get yourself in that position legally.

  Or are there different types of deferment? There are.  For federal loans, you have the in school deferment (for going to school at least half-time) and then you can get deferments for being unemployed (up to 3 years), studying in an approved graduate fellowship, being in a rehabilitation program if your disabled, or if you are experiecing economic hardship (also up to 3 years).  You can also recieve a forbearance for special circumstances that affect your ability to pay at the discretion of your lender and there are some hardship circumstances (like being in a medical residency program. AmeriCorps or Peace Corps, your payments being too large a portion of your income) where you can get a mandatory forbearance.  If you do some Google-ing you can find all the nitty gritty details.

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I've had my loans in deferment for 6 years (4 years school, 2 years economic hardship) and it has not bothered my credit at all.  The loans continue to report "Pays as Agreed" and show that I have a deferment.

[Anonymous]

Thanks for all the information.  I had no idea that the subsidized interest payments would show up on my credit report.  I hope to pay off the majority of the unsubsidized loan with our tax return and next year I won't have to take one out because I should qualify for in-state tuition because of marrying a resident.  Got my fingers crossed that that works out as planned.

[Anonymous]

good info!  thanks all