Re: Sallie Mae and Credit scores
10-11-2012 08:20 PM
The good news is that a high utilization on installment loans (like student loans) has nowhere near the impact of high util on revolving accounts (credit cards), so the impact on your FICO score will be minimal compared to say, maxing out your credit cards. In fact, unless you make a late payment on the loans, you probably won't notice any impact other than the small ding from the new accounts, which will go away as they age.
The less good news is that many lenders will also consider your debt-to-income ratio when they extend you credit, or re-evaluate for your account for whatever reason. If the payments on the loans are excessive for your income, then you will have a hard time getting a loan for big ticket items like a car or mortgage, and if your credit card companies have cause to re-evaluate your limit (or you ask for an increase), they may deny that request because of your existing debt burden.
If you're set on your credit needs until you think you can get those loans paid off, it may never be an issue, but if you're planning a big purchase during the loan term, and those payments will take up a significant portion of your income, you may want to consider what you can do to improve your debt-to-income ratio.