topic Re: student loan consolidation increase fico score? in General Credit Topics

student loan consolidation increase fico score?

treschic — Wed, 27 Feb 2008 16:31:29 GMT

I was reading on the direct loans website, and they make the claim that consolidating student loans helps to increase your fico credit score. Is there any truth to this? I currently have around 18 (can't remember exact number) federal loans, that i'm considering consolidating.

Re: student loan consolidation increase fico score?

Anonymous — Wed, 27 Feb 2008 17:23:19 GMT

No, it won't increase you FICO score- at least not for a long time. I fell for this last summer and consolidated all 13 loans. My score tanked because of it.

Think of it this way.....you have had these loans for ___ years now....in good standing (even if they are in deferrment). If you consolidate them it will look like new accounts opened with no history on them of being in good standing. Also, part of the FICO scores is how long your account history has been. This is no longer ___ years old anymore....its brand new. Saying that....in about 10 years these consolidated accounts look great if paid on time.

IMO unless you need lower payments on your loans now...don't do it.

Re: student loan consolidation increase fico score?

treschic — Wed, 27 Feb 2008 18:35:00 GMT

i'm trying to get clean up my credit, so i can apply for a mortgage sometime in the future. and my sl are my only real debt (besides a small cc), but even as my only debt, with the cost of houses in my area, my dti ratio is 45% unconsolidated. not even including if i ever want to buy a car. consolidated, my payments are reduced by 50%.

i just thought it was a win-win situation. they should change their website, and stop making those claims.

Re: student loan consolidation increase fico score?

Anonymous — Wed, 27 Feb 2008 18:41:06 GMT

If you're SL's are your only reporting debt aside from your one CC, then it's probably even better to keep them separate so they'll fall off your reports in a staggered timeframe instead of all at once leaving you with a non existant history since history is a big part of scoring as well.

Re: student loan consolidation increase fico score?

Anonymous — Wed, 27 Feb 2008 18:41:17 GMT

Although I am no expert I did not experience any significant drop in Fico after I consolidated. As I understand it, those loans that are now at 0 balances will still show on your account for 10 years as good accounts. Also I believe it may help some people who have too many accounts with balances holding back their score. You can go from 6 accounts with balances to 1.

I think it is different in every circumstance. But consolidating in order to lower your DTI significantly will probably be important if you want to buy a house so it may be worth any possible score drop. Hopefully one of the experts can jump in here and give a little bit more knowledge!

Re: student loan consolidation increase fico score?

Anonymous — Wed, 27 Feb 2008 21:07:04 GMT

My drop was 15 points-

I was not expecting that as I thought it would be 1 loan- but it reports as 2 (Unsub and sub)

I might have thought otherwise if I knew this AND that intrest rates were going to go down again-

Re: student loan consolidation increase fico score?

treschic — Wed, 27 Feb 2008 21:11:27 GMT

well, we will see. i don't think mine can drop anymore, considering how low it is already. so, i probably won't see much of a difference. i just consolidated today, knowing if i didn't, i'd get lazy, and would probably wait and wait and wait, and get another late pay, just to bring my credit score down even further. thanks everyone

Message Edited by angiepharm on 02-27-2008 04:11 PM

Re: student loan consolidation increase fico score?

Anonymous — Wed, 27 Feb 2008 21:14:21 GMT

That will make it easier to manage-

Double check to make sure they got ALL of them-

Take the 2 year interest only- and then pay what you have been paying at it- FICO was happy when that UTL came off 100%.

angiepharm wrote:

well, we will see. i don't think mine can drop anymore, considering how low it is already. so, i probably won't see much of a difference. i just consolidated today, knowing if i didn't, i'd get lazy, and would probably wait and wait and wait, and get another late pay, just to bring my credit score down even further. thanks everyone

Message Edited by angiepharm on 02-27-2008 04:11 PM

Re: student loan consolidation increase fico score?

Anonymous — Wed, 27 Feb 2008 23:15:15 GMT

I've been tempted to consolidate student loans also, but after reading this I don't think I will. Not only would it likely be three consolidations (PPO,Sub,unsub), but all the closed accounts would continue to show the lates for 10 years on my CR.

I would avoid Direct Loans. They are absolutely non-forgiving on lates. They report them and my first GW was denied. Of course, I will continue GW's. Sallie Mae has been much better.

I could be wrong, but I don't think you have to consolidate the loans with the companies you currently have the loans with, so I would shop around. Just stay away from hard core Direct Loans.

Re: student loan consolidation increase fico score?

treschic — Wed, 27 Feb 2008 23:43:58 GMT

i just consolidated with direct. they reported my lates, as well as nelnet. but even though they refused to erase my lates, they were much nicer customer service wise to deal with. nelnet, was a little more difficult, and its hard to get a person on the phone. plus direct gives you a 0.25% discount on the interest rate if you pay online (any little bit of money will help). sallie mae is much better customer service wise though. i've never had any lates with them though, so i'm not sure how forgiving they are either.

BTW- i think the lates will still come off in 7 years though, even though the tradeline will stay for 10. i think good closed accounts stay for 10, and bad closed accounts and lates still come off in 7. (i could be wrong though)

Message Edited by angiepharm on 02-27-2008 06:43 PM