I was lookijng at my amex credit score and it told me that my credit score is impacted by my student loans. This I obviously knew. However, what it is saying is they look at how much my student loans were originally compared to how much they are now. Meaning the more I pay down the less impact it has on my score. This I didn't understand. Lets take two different people. Person A started with 150k in student loans and is now paid down to 50k.Person B started with 30k student loans and is only at 29k. Assuming all else is the same in credit reports whose credit score takes a bigger hit when it comes to the student loans? Is it A automatically because they have a higher amount due? Or is it B because they have paid their loan down to less of a percentage of the original amount due?
;
@red259 wrote:I was lookijng at my amex credit score and it told me that my credit score is impacted by my student loans. This I obviously knew. However, what it is saying is they look at how much my student loans were originally compared to how much they are now. Meaning the more I pay down the less impact it has on my score. This I didn't understand. Lets take two different people. Person A started with 150k in student loans and is now paid down to 50k.Person B started with 30k student loans and is only at 29k. Assuming all else is the same in credit reports whose credit score takes a bigger hit when it comes to the student loans? Is it A automatically because they have a higher amount due? Or is it B because they have paid their loan down to less of a percentage of the original amount due?
Ignore the verbiage, FICO 8 calculates all installment the same way, namely utilization breakpoints where <10% = primo (aggregate) and somewhere either 80/70% which I still haven't seen a 100% solid datapoint on is the higher boundary though TT or CGID might've seen one I haven't seen it well documented.
Anyway in your example Person A > Person B, but on my file that would only be worth 6 points or thereabouts. If Person A got down to call it 14K (or any non-zero number <10% seemingly) that would be worth an additional 18ish points on my file. If they then paid off said loans, they'd lose all 24 example points. We've seen clean files where this is worth nearly double, namely 45 point swings for the pretty credit people.
To be fair not certain we've had anyone strenously test it with student loans, I'm debating doing something awkward and getting a bunch of Federal student loans and just paying them off way quick for the ~30K tuition / fees I'm going to incur over the next two years since I know the Federal loans pay ahead just fine based on the government documentation.
I'm just trying to get below 80% aggregate since my damned mortgage knocked said 24ish points off my FICO 8, and it's going to be a long time before I recover those lost points.
@Revelate wrote:
@red259 wrote:I was lookijng at my amex credit score and it told me that my credit score is impacted by my student loans. This I obviously knew. However, what it is saying is they look at how much my student loans were originally compared to how much they are now. Meaning the more I pay down the less impact it has on my score. This I didn't understand. Lets take two different people. Person A started with 150k in student loans and is now paid down to 50k.Person B started with 30k student loans and is only at 29k. Assuming all else is the same in credit reports whose credit score takes a bigger hit when it comes to the student loans? Is it A automatically because they have a higher amount due? Or is it B because they have paid their loan down to less of a percentage of the original amount due?
Ignore the verbiage, FICO 8 calculates all installment the same way, namely utilization breakpoints where <10% = primo (aggregate) and somewhere either 80/70% which I still haven't seen a 100% solid datapoint on is the higher boundary though TT or CGID might've seen one I haven't seen it well documented.
Anyway in your example Person A > Person B, but on my file that would only be worth 6 points or thereabouts. If Person A got down to call it 14K (or any non-zero number <10% seemingly) that would be worth an additional 18ish points on my file. If they then paid off said loans, they'd lose all 24 example points. We've seen clean files where this is worth nearly double, namely 45 point swings for the pretty credit people.
To be fair not certain we've had anyone strenously test it with student loans, I'm debating doing something awkward and getting a bunch of Federal student loans and just paying them off way quick for the ~30K tuition / fees I'm going to incur over the next two years since I know the Federal loans pay ahead just fine based on the government documentation.
I'm just trying to get below 80% aggregate since my damned mortgage knocked said 24ish points off my FICO 8, and it's going to be a long time before I recover those lost points.
Ugh I'm at around 76% util on my student loan. Should drop down to below 75% in a month or two.
@Anonymous wrote:Are your student loans your only open installment loans?
Yes
@Anonymous wrote:Then there's nothing you can do except relax and allow your loan balances to gradually come down. Revelate led a big team of people last year who were trying to find where the breakpoints were. His group seemed to incontrovertibly settle on 10% being the lowest. Once you got below that you were in the sweetest spot and you wanted to keep those "mostly paid off loans" open for as long as you can.
As R says, I don't think they settled on 70% or 80% as one of the middle ones. Could be either. Bear in mind that, just because you see that reason verbiage, it doesn't mean that you haven't passed one of the breakpoints already. In other words, maybe there is one at 80% and you already went passed it. You will likely see that langauge until you are under 10%. So don't get your heart set on getting a boost when you cross 70%.
<snip>
One nice thing about student loans is that, if you do get some extra money from a ship that comes in, you can typically pay them way down and still keep them open for a long time. Unlike a car which typically has a fixed term.
Yeah, I had the verbiage about my loan balances being too high (which is definitely something on my report with all the negatives I have on it for that to make the list at all it's kinda a non-trivial deal) until I got under the 10% line. I'd have to go back and check but I do think the reason codes shifted around some.
Regarding the pink, isn't there a fixed term with a student loan, namely 10 years on the Standard repayment plan? It's just roughly double the standard auto loan term... you can pull the same tricks on any installment loan as long as they don't reset payment date (DCU) which fortunately I don't think anyone's found any other example except for them.
I looked a little bit into SL's to see how I could game the system, and other than letting the full amount ride (or some non-trivial fraction of it) wasn't any way to extend it (much) through a consolidation loan. It'd simply be bad financial math for me to let them ride, it's one thing paying pennies on the reindeer games with Alliant et al, but doing that at 30K and leaving them hanging out for 2ish years at 4.5% not including inflation, hrm. Better to just take the rolling 10 year term and pay them 99% off quickly is my thinking.
Really the optimal case is to get any debt costing more than pennies a month out of one's life, and then sort the FICO angle with the share secured loan trick.
@Anonymous wrote:Thanks, R. I must be in an unusually friendly situation where my loan has tremendous flexibility in terms of how long I extend it. I know that SLs in general often are paid off soon -- or might take a person decades to pay off, so I assumed my loan was typical in that respect.
But I have no problem believing that my loan is atypical and that they usually have a more structured payoff time. It actually took me far longer than I would like to admit to figure out that I could pay mine way out and pay a few nickels of interest on the tiny remaining balance.
Love your last paragraph, btw. Spot on.
Are your student loans Federal or private? If Federal did you qualify for an extended repayment (currently >30K outstanding)? That allows up to 25 years not including consolidation loans which can take it out to 30 according to studentaid.gov.
Trying to do full monty hardcore reindeer games with the federal financial aid system (going for the 25-30 year loan) would cost me ~$675, minus whatever charges I would incur financing this scholastic adventure otherwise via HELOC or the carebear reindeer game route.
Looked at rationally not sure the ~10 points on FICO 8 and likely 9 would be worthwhile by the time this is complete, I should be comfortably over 760 post graduation in 2 years anyhow and it's not like my file isn't plenty thick anyway. My attitudes towards eeking out every single point available should objectively change once that no longer matters from being in the top tier anyway.
@Revelate wrote:
@Anonymous wrote:Thanks, R. I must be in an unusually friendly situation where my loan has tremendous flexibility in terms of how long I extend it. I know that SLs in general often are paid off soon -- or might take a person decades to pay off, so I assumed my loan was typical in that respect.
But I have no problem believing that my loan is atypical and that they usually have a more structured payoff time. It actually took me far longer than I would like to admit to figure out that I could pay mine way out and pay a few nickels of interest on the tiny remaining balance.
Love your last paragraph, btw. Spot on.
Are your student loans Federal or private? If Federal did you qualify for an extended repayment (currently >30K outstanding)? That allows up to 25 years not including consolidation loans which can take it out to 30 according to studentaid.gov.
Trying to do full monty hardcore reindeer games with the federal financial aid system (going for the 25-30 year loan) would cost me ~$675, minus whatever charges I would incur financing this scholastic adventure otherwise via HELOC or the carebear reindeer game route.
Looked at rationally not sure the ~10 points on FICO 8 and likely 9 would be worthwhile by the time this is complete, I should be comfortably over 760 post graduation in 2 years anyhow and it's not like my file isn't plenty thick anyway. My attitudes towards eeking out every single point available should objectively change once that no longer matters from being in the top tier anyway.
Can you consolidate private loans as well or only federal? My private loan interest rates are in the 3% area. My federal loans appear to have been consolidated years ago and are charging me 8.2% interest. Once you consolidate loans is there anything that can be done to lower interest rates or extend payments. The amounts I owe on these loans seem to be absurd.