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New Member
Posts: 3
Registered: ‎07-10-2012
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Paid off student loans and score dropped??

Never paid attention to credit score and am now regretting it. I actually messed up my credit while thinking I was doing the right thing. I cancelled credit cards since I thought having less would help. As of right now I have very little to build my credit. 3 months ago I paid off about $8000 the remaining balance on 4 different student loans in the same month. I wanted to get it off my credit score but now that it is reported as accounts closed, my credit score actually dropped. Did I do the wrong thing by paying them off? I also am wondering if I should open some credit cards since I only have one now. I pretty much have zero credit owed. I had about $10,000 on credit cards 5 years ago when I went back to school, I paid them off and cancelled some cards since I was going to work less due to school. When I received my student loans I was around mid 700s now I'm around 700. What are some actions I should take to improve score? Any help would be appreciated.

Moderator Emeritus
Posts: 32,869
Registered: ‎08-04-2007
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Re: Paid off student loans and score dropped??

OP, where did you get your credit score from?

New Member
Posts: 3
Registered: ‎07-10-2012
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Re: Paid off student loans and score dropped??

I signed up here about 2 months ago. It says my equifax score was 698 when I signed up, I recieved an alert today and now it says eq is 689 and change is because of changes to my student loans accounts which are now closed and paid off. Like I said I am new to paying attetion to credit scores. I have late payments 2 and half years ago on student loans that were sold to another company. I wasn't living at home at the time and didn't realize part of my loans were sold off to another company. I'm completely lost on where to start and how to improve my score even while reading advice here. I was always good at paying things on time, but tried to stay away from having any credit which I thought was a good thing in the past. Now I'm starting to realize I should have kept accounts open since I wasn't keeping a balance on them.

Valued Contributor
Posts: 2,300
Registered: ‎08-25-2011
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Re: Paid off student loans and score dropped??

Time to open up some credit cards.

Frequent Contributor
Posts: 258
Registered: ‎06-10-2012
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Re: Paid off student loans and score dropped??

One of the factors that affects your score is your "credit mix," i.e. managing different types of credit.  I wouldn't have thought that paying off your SLs completely would affect this much, provided the paid loans were still showing on your CR, but maybe I'm wrong.  Do you have any other installment loans on your CR (e.g. auto loans)?

 

If you're looking to build long-term, my advice would be to have three open revolving accounts (that seems to be the magic number for credit building purposes).  You'll take a hit in the short term with the shortened AAoA and the HPs, but the additional TLs will help you long term. 


Starting Score: 617 (EQ 6/10/12)
Current Score (8/28/13): EQ: 691 EX: 706 TU: 700
Goal Score: 700

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New Member
Posts: 6
Registered: ‎11-05-2011
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Re: Paid off student loans and score dropped??

[ Edited ]

Were your student loans in default?  You said that they had been sold off due to non-payment which makes me believe they were in default.  If that is the case, you unfortunately did more harm then good by paying off the loans as backwards as that sounds.  You might want to check on the student loan board to see if there is any way to get the tradeline dropped from your credit report.

New Member
Posts: 3
Registered: ‎07-10-2012
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Re: Paid off student loans and score dropped??

Thanks for everyone responding. I just applied for a credit card with citi. Should I apply for credit cards at 1 time or wait. Said here 3 cards is a good number. Would it hurt my score or affect my chances of getting 2nd card if I applied for another one now? Trying to avoid further mistakes so any help is appreciated.

 

Sorry but would enlighten me on what this does?

"You might want to check on the student loan board to see if there is any way to get the tradeline dropped from your credit report."

Member
Posts: 6
Registered: ‎04-19-2011
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Re: Paid off student loans and score dropped??

Ok. I'm not sure about how many cards you have but if you already have two then please do not purchase anymore. One thing about credit cards is they will boost your score every month about 20 -25 points if your following the golden rules of not maxing them out. If I was you I will pay my credit cards off till its balance is zero and then every month for the next several month I will use around $50 dollars or less to keep them active. Then pay the balance off within the next week or two....always pay your balance in full. You will see your credit score increase dramatically. Whatever you do please dont go and open any new credit because they look at how much debt your in. Also one more thing be sure to keep your balance with your credit cards under $50....and that is no matter how much your credit limit is. They usually report to the bureaus on the 15th or 16th of the month...so please make sure your balance is zero when they report.

Regular Contributor
Posts: 200
Registered: ‎03-15-2012
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Re: Paid off student loans and score dropped??

 


sharpeboy33 wrote:

Ok. I'm not sure about how many cards you have but if you already have two then please do not purchase anymore. One thing about credit cards is they will boost your score every month about 20 -25 points if your following the golden rules of not maxing them out. If I was you I will pay my credit cards off till its balance is zero and then every month for the next several month I will use around $50 dollars or less to keep them active. Then pay the balance off within the next week or two....always pay your balance in full. You will see your credit score increase dramatically. Whatever you do please dont go and open any new credit because they look at how much debt your in. Also one more thing be sure to keep your balance with your credit cards under $50....and that is no matter how much your credit limit is. They usually report to the bureaus on the 15th or 16th of the month...so please make sure your balance is zero when they report.


That's misleading to say the least.

 

Saying they boost your score 20-25pts/month is based on what? Your experience? That's not the norm at all.

OP - don't expect results that dramatic. Pay your bill in full every month before your statement hits for slow growth. You need to establish good payment history.

 

They report to the bureaus based on when your statement cuts. For example, my Amex statement cuts on the 20th and reports then. My Mastercard statement cuts the 30th/31st and reports then.

 

Your Mileage May Vary!!!

2009-10 - C/Os
2011 - Debts paid, no open credit
2012 - Rebuilding started, secured cards opened, SL rehabbed - EQ myFICO 636
2014 - 10k Discover, 3.5k Freedom, AmEx Green, SL, Auto Loan - EQ myFICO 695
New Member
Posts: 2
Registered: ‎02-27-2013
0

Re: Paid off student loans and score dropped??

Question on your comments to the defaulted student loan. I'm also in process of paying off my default student loan which was sold off to a collection agency. I have done my homework and due that these loans are unsecured loans more then likely they will negotiate the total sum down.

What do you suggest one does not pay it off? Or negotiate with them and as well request that your credit me wiped clean? What ls the right terminology if you don't mind me asking. I appreciate your time in advance thank you
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