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Consolidation Question

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Consolidation Question

If I was to consolidate 11 “current” FSLs, does that do anything good or bad for my credit scoring? I have 6 recent missed payments on all 11 accounts, but naturally, they are also my “oldest” accounts that are open. I have no other accounts that are open (other than collection accounts). I’m just trying to compare and understand the pros/cons of this option.
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Valued Contributor

Re: Consolidation Question


@nohamcased wrote:
If I was to consolidate 11 “current” FSLs, does that do anything good or bad for my credit scoring? I have 6 recent missed payments on all 11 accounts, but naturally, they are also my “oldest” accounts that are open. I have no other accounts that are open (other than collection accounts). I’m just trying to compare and understand the pros/cons of this option.

Closed accounts are not generally removed until ~10years after their closing date (I'm staying general here, because sometimes they drop off sooner or stay on later, but the rule of thumb is 10y after closing).   So closing them doesn't necessarily mean anything bad (or good, really).

Consolidation means a new loan, resetting your age of youngest account to 0 and it will cause a drop in  your average age of accounts.   How much of a drop depends on  your profile, but with 11 loans, it will probably not factor in too much.

If it's for the ease of payment - you can ask your lender to  take a single payment to distribute over the 11 lines.
Mathematically speaking, the 11 (old!) lines could do you more good than harm in the long run, as long as you don't have any more negatives (lates).  
Unfortunately, if you consolidated and closed those 11 lines you would still have to wait the 7y (from the date of the lates) for the lates to fall off.

 

 




Garden goal: keep on keepin' on until 2020.
Message 2 of 3
Established Contributor

Re: Consolidation Question

+ 1 everything Calyx said. 

 

Many people consolidate when they have to (default) or the convenience of having one loans. The latter is usually more helpful when you have more than one servicer. Otherwise, you can just call your servicer and have them group the loans for a single payment.

 

There are few other things to keep in mind. If a person has an interest in PSLF or IDR loan forgiveness, this will completely reset the qualifying payment count. This is not able to be reversed.

 

It also gives you a new loan at 100%. If you had paid any of them down, now you'll have to start from scratch in terms of utilization. The score may also not take into account the utilization of the closed accounts, so you could just have a single high utilization loan. Any interest will also capitalize. 

 

Servicers also often miscalculate things such as interest. If you were to catch a past error in your old account (s), it would be too late to get a correction. Once you consolidate you agree the balance is accurate. 

 

Hope this helps !




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