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Will adding a federal student loan drop credit score?

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Anonymous
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Will adding a federal student loan drop credit score?

Just finishing up my last semester and my parents are taking out two loans - a federal one and parent plus one. The reason I'm concerned is I'm vehicle shopping as we speak and I don't want my score dropping. I have two loans out now ($14,498 total). My parents are paying for my school, they'll pay them all off when I graduate. They both say that neither will impact my credit score. Are they right? 

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calyx
Super Contributor

Re: Will adding a federal student loan drop credit score?

Who is being named in the loans?  If they're your loans (cosigned or not with your parents), then yes, you could experience a small drop in your scores as your average age of accounts dips.    It's not guaranteed, and it probably wouldn't be much, honestly. 

Happy practitioner of AZE7or8or9or10 | Team Finances > FICO
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Anonymous
Not applicable

Re: Will adding a federal student loan drop credit score?

The parent PLUS loan is a federal loan. If you don't have an installment loan already you might experience a gain from a student loan on your report. I'm not sure this would report in time for any car shopping you might do. The onlybquick fix would be to clean up anything that might be weighing your score down if you need to. It might be more dependant on your income. Btw, credit unions are a great place to check out for car loans. I've heard a lot of good things about Navy Federal CU.

@Calyx Can you get the federal PLUS loan and a federal student loan at the same time?
Message 3 of 4
calyx
Super Contributor

Re: Will adding a federal student loan drop credit score?

I would also add that many auto-lenders use industry scores that consumers do not have access to, and it's anyone's guess what will happen there.   Here, we just have the consumer available scores that we've (sort of) hashed out.

 

If your parents get a Parents PLUS loan, it will not be in your name, and will not affect your score

 

@Anonymous wrote:

@Calyx Can you get the federal PLUS loan and a federal student loan at the same time?

$64 million question, right?  My understanding is that the Parents PLUS is for the parents, and the federal student loans are with the student.  Essentially, Parents PLUS is intended to make up for any short falls if the student cannot borrow enough.

 

OP, can you clarify?   Are they trying to take out two different loans in their own names?  Or are they having you take out more federal loans which they are going to pay back and making up shortfalls with the Parents Plus that they're taking out?

Otherwise, (Direct) PLUS is also for grad and professional students and I am baffled as to what's going on here.  7% on Direct/Parents Plus - ouch.   

 

Happy practitioner of AZE7or8or9or10 | Team Finances > FICO
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