Paying Off Loans

[Anonymous]

My daughter just graduated from college and has a few student loans (Stafford, non-subsidized).  What is the difference, including magnitude, if any, to her FICO score if she:

1. Pays off the entire ballnace in one lump sum, or

2. Pays off the balance in large chunks over the next 3 years, or

3. Makes small monthly payments for a number of years.

Thanks in advance!

[Anonymous]

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@Anonymous wrote:

My daughter just graduated from college and has a few student loans (Stafford, non-subsidized).  What is the difference, including magnitude, if any, to her FICO score if she:

1. Pays off the entire ballnace in one lump sum, or

2. Pays off the balance in large chunks over the next 3 years, or

3. Makes small monthly payments for a number of years.

Thanks in advance!

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Welcome to the forums, john78!

I think you are going to have to run that one through the score simulator.

[Anonymous]

Agreed.  But personally, regardless of what it does to the score, I would pay it off cause it would definitely save a good amount of money in interest.

[RobertEG]

As has been said, this is the proverbial question of what is more important, FICO score or financial implications.

If she is not seeking new credit in the near future, FICO is not even a real issue.  Either of the three payment options wont have much affect on FICO, for % util on loans is scored low.

Avoiding interest is a financial matter.  FICO and financial impact are never one and the same.

For financial reasons, pay it off as soon as possible.  For FICO reasons, paying it down sooner will also help, but not that much.

[Anonymous]

Hi john78,  This is just my opinion.

Remember that FICO likes a mix of credit.

The longer the history the better.

History gets deluted every time that you receive new credit But length of history stays the same as long as they are reporting.

Installments only count 10% for scores. CCs are 1/3

If PIFd then these would delete from her CR in 10 years (from date paid). This is a long time for her right now but could change later.

Does she have any CCs in her name or is she an AU on your CCs?

[Anonymous]

It was a sad day when my paid SL's fell off my EQ CBR in January of this year. The TL dated to 1971. 

[Anonymous]

Yes, she has a CC in her name with a $2500 limit, and is an authorized user on our (her parents) account with a 10,000 limit.  Is there a short expanation somewhere of the different effect on her credit score by being an AU? How is this reported? I don't recall giving the bank her SSN when we added her to our account.

[Anonymous]

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@Anonymous wrote:
Yes, she has a CC in her name with a $2500 limit, and is an authorized user on our (her parents) account with a 10,000 limit.  Is there a short expanation somewhere of the different effect on her credit score by being an AU? How is this reported? I don't recall giving the bank her SSN when we added her to our account.

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Not all AU accounts are reported. Check her CBR to see if this one is being reported. If it is not being reported ask the issuers CS or here if it should be.

AU scoring is a complicated issue. There are many threads here on the subject.

[Anonymous]

Thanks.

2 rookie questions:

How do I use the score simulator? is it on this website?

How do I check her CBR?

Thanks again!

[Anonymous]

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@Anonymous wrote:

Thanks.

2 rookie questions:

How do I use the score simulator? is it on this website?

How do I check her CBR?

Thanks again!

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Pull her EQ report first thru this site. (Search the web for a discount code first so you can save a few dollars.) I would make sure she is available as you may need some personal information to complete the transaction. After you have the report and a score the simulator will allow you to see what the effect of particular actions will be on her score. It is decent, but not perfect. It is an estimate.