topic Re: Does Student Loans Affect Approval% For CCs? in Credit Cards

Does Student Loans Affect Approval% For CCs?

CEOriginal — Wed, 12 Jun 2013 12:35:17 GMT

I'm wondering if your history with your student loan lender will affect how CC lenders view you?

Do they factor into the debt-to-income ratio? Or do CC companies not care much about that?

If you've been late (not defaulted, just 30-, 60-, or 90- day lates), is that viewed unfavorably or is it ignored because they're student loans?

MODS: I didn't know which forum to post this. If it's best served somewhere else, feel free to move!

Re: Does Student Loans Affect Approval% For CCs?

Anonymous — Wed, 12 Jun 2013 12:47:56 GMT

@CEOriginal wrote:
I'm wondering if your history with your student loan lender will affect how CC lenders view you? Installment loans don't help as much, but any kind of positive history is good, and still contribute.

Do they factor into the debt-to-income ratio? Yes Or do CC companies not care much about that? They care.

If you've been late (not defaulted, just 30-, 60-, or 90- day lates), is that viewed unfavorably or is it ignored because they're student loans? Any kind of lates or negatives on installment accounts are as serious as any lates or equivalent on revolving accounts

MODS: I didn't know which forum to post this. If it's best served somewhere else, feel free to move!

Answered in red.

Basically, you want to avoid any derogs in general. As long as it reports to the CRAs, you will be dinged as hard regardless of the account type that you are late on.

Re: Does Student Loans Affect Approval% For CCs?

CEOriginal — Wed, 12 Jun 2013 12:51:17 GMT

Hmmm thanks for the info. I've seen conflicting answers regarding the debt to income ratio, but more have gone towards the "yes" side.

Re: Does Student Loans Affect Approval% For CCs?

Anonymous — Wed, 12 Jun 2013 13:12:15 GMT

Nvm thought u were asking something else originally.

Lenders do care about your DTI. It's an indicator how well you are managing your debt level.

Re: Does Student Loans Affect Approval% For CCs?

Revelate — Wed, 12 Jun 2013 13:07:56 GMT

@CEOriginal wrote:
Hmmm thanks for the info. I've seen conflicting answers regarding the debt to income ratio, but more have gone towards the "yes" side.

It's safe to say anything which can be found or determined through a credit report is fair game from an underwriting perspective.

DTI absolutely gets used for virtually every credit or loan application of any type; lenders include that in their underwriting decision as it directly effects the risk calculations for a given consumer, and credit cards are no exception. Well one possible exception *might* be secured cards, but I suspect it's done there as well for fraud check purposes if nothing else.

Out of curiosity, where have you seen different posted?

Re: Does Student Loans Affect Approval% For CCs?

CEOriginal — Wed, 12 Jun 2013 13:10:52 GMT

@Revelate wrote:
@CEOriginal wrote:
Hmmm thanks for the info. I've seen conflicting answers regarding the debt to income ratio, but more have gone towards the "yes" side.

It's safe to say anything which can be found or determined through a credit report is fair game from an underwriting perspective.

DTI absolutely gets used for virtually every credit or loan application of any type; lenders include that in their underwriting decision as it directly effects the risk calculations for a given consumer, and credit cards are no exception. Well one possible exception *might* be secured cards, but I suspect it's done there as well for fraud check purposes if nothing else.

Out of curiosity, where have you seen different posted?

Another forum specifically for grad students. Since I'll be starting my Masters this fall, I asked the question there thinking I'd get a clear, concise, and educated answer. I thought wrong lol

Re: Does Student Loans Affect Approval% For CCs?

crunching_numbers — Wed, 12 Jun 2013 13:50:26 GMT

CEOriginal-
People on a Grad student forum are probably well versed in student aid, thesis preparation, housing options, balancing work and school, etc. Most are fairly young, and relatively new to credit. We have a few credit junkies here on the forums that are young and knowledgeable, but the average grad student has limited exposure to credit issues.
On the other hand, this forum is full of people with credit issues, history , and experience (both good and bad). The answer you get here will be read by and approved by multiple credit junkies. Just like in research, you need to consider the source. If the answers seem to conflict, evaluate the possible reasons.

BTW- a 30d late on a student loan is just as harming to an approval as a 30d late on a CC. Both send the same message- "I have a history of not being responsible with my credit". FICO will punish you equally for both. DTI clearly plays a greater role in obtaining a mortgage, but CC companies are asking for your income for a reason. They are evaluating your ability to pay. Ability to pay equates to DTI.

Re: Does Student Loans Affect Approval% For CCs?

jla84 — Wed, 12 Jun 2013 14:27:48 GMT

Just from my experience, I have almost $100,000 in student loan debt and a relatively (for the amount of my student loan debt) low-paying job and I haven't had any trouble getting CCs and have several cards above 5K. However, I've never been late on my student loans, so I cannot speak to that but I'd expect that they look negatively on late payments on any portion of your CR.

Re: Does Student Loans Affect Approval% For CCs?

crunching_numbers — Wed, 12 Jun 2013 14:50:20 GMT

Jla84-
It is not as much the total amount you owe that comes into play as the minimum monthly payment on those loans. When DTI is calculated, they look at what all of your minimum monthly payments add up to. There is a big difference in the payment on $100k over 5 years and $100k over 30 years.

Re: Does Student Loans Affect Approval% For CCs?

Anonymous — Wed, 12 Jun 2013 15:08:22 GMT

Was just denied a CLI from Amex solely because of DTI (student loan) reasons, so I would imagine it's a very real consideration.

Re: Does Student Loans Affect Approval% For CCs?

CEOriginal — Wed, 12 Jun 2013 15:31:51 GMT

@crunching_numbers wrote:
Jla84-
It is not as much the total amount you owe that comes into play as the minimum monthly payment on those loans. When DTI is calculated, they look at what all of your minimum monthly payments add up to. There is a big difference in the payment on $100k over 5 years and $100k over 30 years.

This is what I was looking for! Thanks!

BTW, I agree with your prior post as well, which is why I came here :-)

Re: Does Student Loans Affect Approval% For CCs?

jla84 — Wed, 12 Jun 2013 16:22:55 GMT

@crunching_numbers wrote:
Jla84-
It is not as much the total amount you owe that comes into play as the minimum monthly payment on those loans. When DTI is calculated, they look at what all of your minimum monthly payments add up to. There is a big difference in the payment on $100k over 5 years and $100k over 30 years.

Ah - that makes a lot more sense then. Thanks!

Re: Does Student Loans Affect Approval% For CCs?

daybreakgonesXe — Wed, 12 Jun 2013 17:15:20 GMT

@CEOriginal wrote:
I'm wondering if your history with your student loan lender will affect how CC lenders view you?

Do they factor into the debt-to-income ratio? Or do CC companies not care much about that?

If you've been late (not defaulted, just 30-, 60-, or 90- day lates), is that viewed unfavorably or is it ignored because they're student loans?

MODS: I didn't know which forum to post this. If it's best served somewhere else, feel free to move!

OP - Not sure if you're referring to those loans that are in repayment, or including those that are in deferrment.

Both my brother's and I's loans are in deferrment. My loan dispersements are posted onto the original loan, so it looks like it's been open since 9/10, but each semester the amount of the loan increases. It also reports my loan payment as $0, and notes indicate that the loan is in good standing, but in deferrment. I have not had a problem with CLI or approvals due to DTI, likely because of the reasons mentioned before.

My brother's 1st year loan had the two semesters dispersements in the same loan, but his second year loans got split from the first and split even further into subsidized and unsubsidized, effectively making it 3 loans. Though each loan is in deferrment, they report minimum payment amounts for whatever reason in the credit report, even though he doesn't have to make them yet. Either way, his applications haven't been denied either. Nor can I remember any reasons for affecting his score being DTI.

Hope that helped a little!

Re: Does Student Loans Affect Approval% For CCs?

lithium78 — Wed, 12 Jun 2013 19:08:52 GMT

A long time ago (in a galaxy far, far away), I defaulted on my student loans and it took six years to fix the problem. The only reason it didn't take seven years is because the federal government sold my loans to EdFinancial and they scrubbed my baddies a year early. Defaulting on your student loans is one of the worst possible things you can do to your credit. I couldn't get a car loan, I had trouble getting work, and I was stuck using Orchard Bank and Credit One cards for years. The best thing you can do is to consolidate your loans while the rates are still low, so you only have to make one payment a month. Then, if they are deferred, start making regular payments on it anyway, because no interest is charged on federal subsidized loans while they are in deferment. I'm still paying my student loans, but they are deferred because I went back to school for a new certificate and I am saving hundreds of dollars a month by still making my regular payments.

Re: Does Student Loans Affect Approval% For CCs?

ReaLiLJ — Wed, 12 Jun 2013 19:14:13 GMT

@crunching_numbers wrote:
CEOriginal-
"People on a Grad student forum are probably well versed in student aid, thesis preparation, housing options, balancing work and school, etc. Most are fairly young, and relatively new to credit. We have a few credit junkies here on the forums that are young and knowledgeable, but the average grad student has limited exposure to credit issues.
On the other hand, this forum is full of people with credit issues, history , and experience (both good and bad). The answer you get here will be read by and approved by multiple credit junkies. Just like in research, you need to consider the source. If the answers seem to conflict, evaluate the possible reasons."

-Couldn't of said it better, and I'm only 19, and a sophomore in college! Not a Credit Guru, like the Guru's that I know on here, but I'm constantly learning, and I tend to know more about credit then the CEO's and higher management who I work for, who all have degrees, and know little to nothing about credit. It's amazing, depressing, but fun to watch them in amazement when you fill them in on how to do's, what to do's, and not to do's.

My 2 cents: Yes they do, they don't help, but they really don't hurt you only in some cases, but for the most part not with applying to credit cards . For exmaple say your 18-21 with no credit history, no credit cards, nothing but you do have a student loan since 2010 (its 2013) so even though you have no credit cards, you still have age history to pop out some score, rather then no credit file at all -(No Credit = Bad Credit) No way around that, so basically if your in PAG or Def. status, it won't hurt you, but it won't help you (help you with good payment history, kill you because its debt lol), but in the end it's a win win situation if you have no credit, or if you have little credit, as it is the age basis, of your history. Another example, say you just got a amex 3/13/13 but you had a student loan in good status, since 2010, it makes your credit history 3 years instead of 3 months, and even thought it affects your debt to income ratio, and may stop you from getting a real high limit, due to the creditor having to put your risk level higher because of it, it is better then having a 3 month record of just a credit card, and also shows that you have a less chance of defaulting if they were to give you a loan in that amount etc etc. (Excuse the amex mention, I know it makes it sound better then it is) lol

Bottomline:

Pros:
-Longer history, (That's why even though it's good to clear the debt, its better to have if you have short history, due to the age it gives)
-It shows good payment history (If in PAG) -which transitions into you being a person good with payments, which lowers your risk rate
-Shows Reponsibility, especially if your paying it down.

-Reports positive since its def. so it looks good on reports, and will up your score if in PAG or Def

-Its a student installment loan, your in school, to them you graduate make big money, get a good relationship with them, and they will expect you to spend that big money on that credit card, and pay them their interest in full, that good ole 18.24% 20.69%, 24.99%. (Those intro rates )% rates fly by faster then you think hahaha
-Shows someone took a chance on you, if its a respected creditor, it gives them leeway to do the same, even if its a low CL

-If its def for in PAG, it will not affect you for apps once you get one or two credit cards and build on it (even if its only been 6 months) and will have little affect on your CL increase decisions as you move forward and grow longer with your cards. (Just probably affect your starting credit lines)

Cons:
-Auto loan distributors frown on it, if the debt is high, due to it makes you incredibly high risk. (Hard to get a car with 100k in debt, and no history) lol
-Its debt, what creditor likes to extend credit to someone with high amounuts of debt? lol (If you owned a bank would you?) Didn't think so!
-It kills your DTI, it's good to have some debt, but having a very high DTI ruins your chance for a good CL, the difference in yes and no for a CLI, and rarely but some of the time a yes or no for an app.
-Puts you at high risk, if debt is extremely high

-Once you default, miss a payment etc. You can kiss all the Pros of that loan ever helping you. (Never miss a payment, if you did, you start your really good payment history all over again, and all the time its been in def, and all the hardwork that loan help/didn't help you is now just going to be for nothing, and will never have a positive light to it for a long time if ever.!

But I hope this kind of helps you on further understanding of student (installment loans) #Cheers -LJ

Tip: Never miss a payment., if your about to it's many ways to file for def. before it happens.

Re: Does Student Loans Affect Approval% For CCs?

09Lexie — Wed, 12 Jun 2013 19:14:37 GMT

@lithium

You sound like me! Not only will the default haunt your credit report, the seizing of tax refunds hurts too! All that bad is behind me thankfully and I'm still paying on mine -rehabbed and showing PAG and since they were the oldest thing on my credit I didn't rush to pay them off.

OP:
Making pyts even a few dollars higher would look good on your report too. DTI has never been a problem with me - hopefully you'll be fine too.

Re: Does Student Loans Affect Approval% For CCs?

toi34 — Wed, 12 Jun 2013 19:57:04 GMT

I was denied for a CC last month because they factored my student loans -- which are DEFERRED -- into DTI! Can you believe that???!!!

Re: Does Student Loans Affect Approval% For CCs?

Anonymous — Wed, 12 Jun 2013 21:05:26 GMT

Toi, just because its deferred doesn't mean you don't need to pay it back....

Re: Does Student Loans Affect Approval% For CCs?

toi34 — Wed, 12 Jun 2013 22:25:13 GMT

@ enharu:

I realize that, but how in the world the recon department calculated what my furture minimum payments would me is baffling, especially since I don't know what they would be???? Plus, there are so many repayment options out there....

But anyway, my reason for posting my experience is to affirm that CC company's figure student loans, not to be ridiculed about not realizing that I have to pay them back -- of course I know that!

Re: Does Student Loans Affect Approval% For CCs?

Anonymous — Wed, 12 Jun 2013 22:37:27 GMT

Your minimum payment required is usually posted in your CR. they just took whatever number that is showing on your CR

And by no means I'm trying to ridicule you.