Federal student loan consolidation

[Gmv]

So I just Consolidated my federal student loan so I can enter the repaye program and the public service forgiveness. I figured my credit score would drop a bit cause of the old accounts but they all have dropped 20-35 pts and im unsure why? Any advice? My credit history age 13 yrs so not quite sure why. 

[calyx]

During consolidation, all of your student loans will close.
The loan will then be reopened with the new lender, but may take some time to report (mine took 4 months).

You may see drops for two (or three reasons):

1.  You have no other installment loans open, and this penalty will go away when your new loan reports

2.  You have reset your AOYA (age of youngest account) to 0
3.  In opening a new tradeline, you may have reduced your average age of accounts (AAoA) across a scoring threshhold.

(I suppose a 4th would be that you took your loans across a utilization threshhold back to 100%, but if you're consolidating for forgiveness reasons, I make the assumption that you haven't paid that much off already).

The good news is that your score will recover!   if it's reason 1 - they'll recover faster than if you dropped your aaoa.

The two questions I would have would be: 

1) has this new loan reported to the CRAs yet?
and
2) are your student loans your only installment loans/tradelines?

[Gmv]

High calyx thanks for replying.. so the federal student loans consolidated under myfed Loan. to answer your questions

1. it shows to have reported to Experian as well as transunion but not equifax yet according to myfico, credit karma and Experian separate app. However it does not show any hard inquires on any monitoring platform. 

2. It is my only installment Loan currently.I have No auto loan or mortgage at this time. I do Have two credit cards. It looks to have dropped my aaoa between 8-10 yrs per CRA. 

I was currently Looking for a home but it looks like that might have to wait. I had Only consolidated so that my ffel loans would qualify for any type of forgiveness that may or may not be coming in September 

[Gmv]

@calyx 

[calyx]

Cool - thanks!

And yes, the mortgage scores are really sensitive to new accounts - I would wait until ast least 6 months after opening the consolidated loan if you can until you go for a mortgage.

So it does look like a fairly significan AAoA drop, which is unfortunate (but Finances over FICO!), but your score will recover over time.   It might take a little time for your scores to stabilize as well, when loans first report to the CRAs it can be messy for a while.  I think I had to wait a full 6 months before my loan started behaving on all three bureaus (equifax took a really long time).   You can disregard the credit karma score, though it's great for watching your reports - I'd bet that once the loan reports correctly across all three, your score will recover some (though not all) of those points, and there's nothing to do besides waiting.

And I know that this board makes it seem like you need a lot (or at least) three cards to get good scores - but my partner had a single card and a single loan and had scores in the 800s when we got our most recent mortgage.  You'll be OK if you just give your tradeline time to age.  mortgage scores prefer the youngest tradeline to be at least a year old, but you'll see significant gains on those scores at 6 months, as well.

[Gmv]

@calyx 

ok thanks for the response. Brings somewhat of a relief. Waiting game it is! 

[IngyHere]

Thanks, I have a similar question, but mine is more of "is it worth it?" I guess based on your experience that I should make any other moves on the horizon before "consolidating" the loan. That is because a federal student loan will consolidate (I think) no matter what the credit score and also credit scores do not impact the rates on this federally subsidized loan. 

[Gmv]

@IngyHere 

Doing more due diligence I'd say yes if you of plans to get a mortgage , auto loan etc id say wait cause it dropped my credit score pretty substantially about an avg of 16 pts across the board. Also it would depend on what your current credit score was possibly. Mine was about 730 across, so that kind of hurt a bit.

no from my understanding your score doesn't not impact the rates. It's based on the average of of the current rates to my knowledge. 

if you decide too tho it will bounce back And may be worth it financially. Fha just passed a law to go off the dti from the ibr based programs currently. So this definitely helps drop the dti which is important to a lender. 

[calyx]

Correct - your rates are not determined by your credit score, but as a weighted average of what your current loans' rates are.