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Paying off my student loan debt

Regular Contributor

Paying off my student loan debt

I graduate this coming May and I plan to pay off my student loan debt shortly thereafter. I currently have 5 seperate loans worth about $23,000. If I pay them all off in full, will that hurt my credit scores for any reason? Also, how long will it take for the payoffs to be reported to the credit reporting agencies?

Rebuilding -->
Starting Scores -- TU:577, EQ:525, EX:572
Current Scores -- TU:676, EQ:627, EX:622
GOAL -- 700+
Message 1 of 8
7 REPLIES
Frequent Contributor

Re: Paying off my student loan debt

Paying them off will hurt your credit mix IF you have no other installment loans reporting. I this can drop your score as much as 30 points. If these are your only installments, I would suggest leaving at least one open with a balance until you are ready to replace it with a new loan (auto, mortgage, personal...).

They should report within 45 days of payoff - student loans are kind of slow to report. And some federal loans only report every 60 days.

Congrats on graduating!
Personal Aphorism:
"Forget What You Feel, Remember What You Deserve"


Starting Score:   09/06/2017: EX 641 ✦ EQ 634 ✦ TU 647
Current Score:  10/28/2018: EX 778 ✦ EQ 782 ✦ TU 768 (missing account)
Goal Score:   800's


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My Lone Baddie: 4.8 Year Old First Premier Charge-Off (PIF)

Tending to my Garden til November 1, 2019





Without patience, we will learn less in life. We will see less. We will feel less. We will hear less. Ironically, rush and more usually mean less.
Message 2 of 8
Established Contributor

Re: Paying off my student loan debt

An installment loan is good to have in your mix. If this (these) are the only installment loans you have, you may see a dip in scores once paid off. Seems counterintuitive, but I've learned that from reading threads here. If you already have another installment loan (car, house, SSL, etc), then you should get a bump when the student loan(s) is/are paid off.  If your lender is reporting monthly it should be no more than a month before the payoff(s) is/are reported. 

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Message 3 of 8
Regular Contributor

Re: Paying off my student loan debt


@tmrwrote:
Paying them off will hurt your credit mix IF you have no other installment loans reporting. I this can drop your score as much as 30 points. If these are your only installments, I would suggest leaving at least one open with a balance until you are ready to replace it with a new loan (auto, mortgage, personal...).

They should report within 45 days of payoff - student loans are kind of slow to report. And some federal loans only report every 60 days.

Congrats on graduating!

I have a car loan that has been reporting for a few months and will continue for a few years. I'm curious what kind of bumps it will yield, if any. I could certainly use one.

 

Thank you!

Rebuilding -->
Starting Scores -- TU:577, EQ:525, EX:572
Current Scores -- TU:676, EQ:627, EX:622
GOAL -- 700+
Message 4 of 8
Frequent Contributor

Re: Paying off my student loan debt

That's where things get interesting/ complicated.

Since you'll be paying them down to zero thus, closing the accounts, the utilization against the original loan amounts will no longer be a factor. Only the util against the car loan amount will be a score factor - so you may not see an increase at all. You would only see a boost if you were leaving the student loans open with a low balance (passing one if the lower util thresholds), because you'd be affecting util.

Once all you have left is the car loan, the util will be based on the remaining balance / car loan amount - and if that percent is still high (which I imagine it is) then your score probably won't benefit.

It's just like aggregate util for credit cards - all balances / total CL. Any original loan amounts of a closed account no longer count. Does that make sense?
Personal Aphorism:
"Forget What You Feel, Remember What You Deserve"


Starting Score:   09/06/2017: EX 641 ✦ EQ 634 ✦ TU 647
Current Score:  10/28/2018: EX 778 ✦ EQ 782 ✦ TU 768 (missing account)
Goal Score:   800's


Take the myFICO Fitness Challenge

My AAOA 3.3 years
My Lone Baddie: 4.8 Year Old First Premier Charge-Off (PIF)

Tending to my Garden til November 1, 2019





Without patience, we will learn less in life. We will see less. We will feel less. We will hear less. Ironically, rush and more usually mean less.
Message 5 of 8
Regular Contributor

Re: Paying off my student loan debt


@tmrwrote:
That's where things get interesting/ complicated.

Since you'll be paying them down to zero thus, closing the accounts, the utilization against the original loan amounts will no longer be a factor. Only the util against the car loan amount will be a score factor - so you may not see an increase at all. You would only see a boost if you were leaving the student loans open with a low balance (passing one if the lower util thresholds), because you'd be affecting util.

Once all you have left is the car loan, the util will be based on the remaining balance / car loan amount - and if that percent is still high (which I imagine it is) then your score probably won't benefit.

It's just like aggregate util for credit cards - all balances / total CL. Any original loan amounts of a closed account no longer count. Does that make sense?

Do you think it would be wise to leave a low balance on each student loan account and pay them down over the next year while I lower the balance on my car loan account?

Rebuilding -->
Starting Scores -- TU:577, EQ:525, EX:572
Current Scores -- TU:676, EQ:627, EX:622
GOAL -- 700+
Message 6 of 8
Frequent Contributor

Re: Paying off my student loan debt

That's what I would do, yes.
Personal Aphorism:
"Forget What You Feel, Remember What You Deserve"


Starting Score:   09/06/2017: EX 641 ✦ EQ 634 ✦ TU 647
Current Score:  10/28/2018: EX 778 ✦ EQ 782 ✦ TU 768 (missing account)
Goal Score:   800's


Take the myFICO Fitness Challenge

My AAOA 3.3 years
My Lone Baddie: 4.8 Year Old First Premier Charge-Off (PIF)

Tending to my Garden til November 1, 2019





Without patience, we will learn less in life. We will see less. We will feel less. We will hear less. Ironically, rush and more usually mean less.
Message 7 of 8
Regular Contributor

Re: Paying off my student loan debt

Personally, if I was ever in a position like that, I would pay down the ones with the highest monthly payments & leave an installment with the lowest payment for awhile to help build that mix & credit history.  

 

I also would never buy a new car right out of college lol

 

But I am older and wiser hahaha

My FICO Scores:
9/17: EQ - 542 / TU - 535 / EX - 506 // Mortgage: 553, 545, 486
10/ 17: EQ - 558 / TU - 563 / EX - 586 // Mortgage: 554, 568, 536
11/17: EQ - 630 / TU - 589 / EX - 614 // Mortgage: 606, 606, 572
12/17: EQ - 630 / TU - 624 / EX - 619 // Mortgage: 584, 612, 671

9/18: EQ - 676 / TU - 676 / EX - 643 // Mortgage: 652, 628, 606





Journey Milestones: Completed Federal Student Loan Rehab in Sept 2017. Settled First Premier Bank CC in August 2017. Constant uphill battle with Navient incorrect reporting on seven (7!) private student loans. No TLs listed in delinquency. Obsessively keeping 2 CC UTI @ 7-9% monthly.

End Goal: Pre-Approval for FHA Spring/Summer 2018 (COMPLETED)
New End Goal: 700+ Spring 2019
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