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Payoff of student loans and Credit Score

Valued Contributor

Payoff of student loans and Credit Score

In the next few months, as money permits, I'm planning to take a very agressive stance on my student loans and do everything I can to get them paid down or paid off. I have 7 loans all through one servicer. The ages range from 5-9 years. By the end of this year they will be the oldest accounts on my file as my old credit cards that were closed in good standing finish dropping off.

 

My question is, if I pay off any of them, how big of a drop, if any, will I experience. At this point, that is my biggest concern. The goal is to pay off the 2 biggest loans of the 7, whose balances are ~$8,600 and ~$11,700.

 

None of them have ever been late. All 7 balances are over the original loan amounts because of capitalized interest before I was placed on IDR in early 2015.




FICO 8 Scores
As of 2-1-19
As of 2-1-19
As of 2-1-19
Message 1 of 14
13 REPLIES
Super Contributor

Re: Payoff of student loans and Credit Score


@macinjosh wrote:

In the next few months, as money permits, I'm planning to take a very agressive stance on my student loans and do everything I can to get them paid down or paid off. I have 7 loans all through one servicer. The ages range from 5-9 years. By the end of this year they will be the oldest accounts on my file as my old credit cards that were closed in good standing finish dropping off.

 

My question is, if I pay off any of them, how big of a drop, if any, will I experience. At this point, that is my biggest concern. The goal is to pay off the 2 biggest loans of the 7, whose balances are ~$8,600 and ~$11,700.

 

None of them have ever been late. All 7 balances are over the original loan amounts because of capitalized interest before I was placed on IDR in early 2015.


No one can quantify the exact amount.

 

We can give you good recommendations on how to proceed with it if we know

 

1. whether you have other installment loans

2. what the original loan amounts and the current balances are

 

As a general rule, you won't lose any points from paying them down, but could lose points from paying them off on some of the scoring models.


FICO8 EQ 760 TU 795 EX 764 Total revolving limits 661200 (551200 reporting)
Message 2 of 14
Valued Contributor

Re: Payoff of student loans and Credit Score


@SouthJamaica wrote:


No one can quantify the exact amount.

 

We can give you good recommendations on how to proceed with it if we know

 

1. whether you have other installment loans

2. what the original loan amounts and the current balances are

 

As a general rule, you won't lose any points from paying them down, but could lose points from paying them off on some of the scoring models.


1. No, my student loans are the only installment loans on my file.

 

2. Here is the list:

1. $3,500 Original Amount;     $3,657.47 Current Amount

2. $6,000 Original Amount;     $8,608.01 Current Amount

3. $1,167 Original Amount;     $1,219.46 Current Amount

4. $309 Original Amount;     $429.78 Current Amount

5. $10,500 Original Amount;     $11,717.37 Current Amount

6. $2,250 Original Amount;     $2,290.83 Current Amount

7. $2,386 Original Amount;     $2,638.90 Current Amount

 




FICO 8 Scores
As of 2-1-19
As of 2-1-19
As of 2-1-19
Message 3 of 14
Moderator Emeritus

Re: Payoff of student loans and Credit Score

See if you can play reindeer games with them.

 

Ultimately you just have to have one installment loan open, at a good balance compared to it's original amount for the FICO win; not sure who your servicer is but as you're hammering your debt just leave a bit left on one of them and see what it does to your due date.

 

And if not, it's not like you can't sort it out with a SSL or even unsecured loan somewhere but there's a lack of testing happening in finding another, which I guess I can't rationally fault.




        
Message 4 of 14
Valued Contributor

Re: Payoff of student loans and Credit Score


@Revelate wrote:

See if you can play reindeer games with them.

 

Ultimately you just have to have one installment loan open, at a good balance compared to it's original amount for the FICO win; not sure who your servicer is but as you're hammering your debt just leave a bit left on one of them and see what it does to your due date.

 

And if not, it's not like you can't sort it out with a SSL or even unsecured loan somewhere but there's a lack of testing happening in finding another, which I guess I can't rationally fault.


FedLoan Servicing.

 

So as long as I keep one open my scores shouldn't take too much of a hit. I could just keep the smallest loan open and pay the regular payments on it for 10 years. It's only ~$429.

 

Should my primary goal be getting all of them under the orignal loan amounts first?

 




FICO 8 Scores
As of 2-1-19
As of 2-1-19
As of 2-1-19
Message 5 of 14
Moderator Emeritus

Re: Payoff of student loans and Credit Score


@macinjosh wrote:

@Revelate wrote:

See if you can play reindeer games with them.

 

Ultimately you just have to have one installment loan open, at a good balance compared to it's original amount for the FICO win; not sure who your servicer is but as you're hammering your debt just leave a bit left on one of them and see what it does to your due date.

 

And if not, it's not like you can't sort it out with a SSL or even unsecured loan somewhere but there's a lack of testing happening in finding another, which I guess I can't rationally fault.


FedLoan Servicing.

 

So as long as I keep one open my scores shouldn't take too much of a hit. I could just keep the smallest loan open and pay the regular payments on it for 10 years. It's only ~$429.

 

Should my primary goal be getting all of them under the orignal loan amounts first?

 


You probably don't have much of a hit currently actually if you don't have payment on them already: the money shot is when you have your aggregate current balance at <9% your aggregate original balance for all your loans.  

 

If you're trying to airstrike your student loans then just pay them off and don't sweat it; just watch what happens to the due date when you make outsized regular payments (explicitly not principal payments which never affect your due date)... basically if your due date gets pushed out to years in advance, you just leave like $2 on one of the loans and pay off all the rest and still get all the benefit from a FICO 8 and some other scores perspective.

 

Ultimately finances >> FICO, if it makes sense to pay off the student loans just do so, but if you can use a trick to boost your FICO scores along the way might as well is my thinking, 7% APR or whatever on $2 is some absurdly small interest charge even over 10 years.




        
Message 6 of 14
Valued Contributor

Re: Payoff of student loans and Credit Score


@Revelate wrote:


You probably don't have much of a hit currently actually if you don't have payment on them already: the money shot is when you have your aggregate current balance at <9% your aggregate original balance for all your loans.  

 

If you're trying to airstrike your student loans then just pay them off and don't sweat it; just watch what happens to the due date when you make outsized regular payments (explicitly not principal payments which never affect your due date)... basically if your due date gets pushed out to years in advance, you just leave like $2 on one of the loans and pay off all the rest and still get all the benefit from a FICO 8 and some other scores perspective.

 

Ultimately finances >> FICO, if it makes sense to pay off the student loans just do so, but if you can use a trick to boost your FICO scores along the way might as well is my thinking, 7% APR or whatever on $2 is some absurdly small interest charge even over 10 years.


Thanks! My first goal is to get rid of the 2 highest balance loans. I want to get rid of them no matter what.




FICO 8 Scores
As of 2-1-19
As of 2-1-19
As of 2-1-19
Message 7 of 14
Super Contributor

Re: Payoff of student loans and Credit Score


@macinjosh wrote:

@Revelate wrote:

See if you can play reindeer games with them.

 

Ultimately you just have to have one installment loan open, at a good balance compared to it's original amount for the FICO win; not sure who your servicer is but as you're hammering your debt just leave a bit left on one of them and see what it does to your due date.

 

And if not, it's not like you can't sort it out with a SSL or even unsecured loan somewhere but there's a lack of testing happening in finding another, which I guess I can't rationally fault.


FedLoan Servicing.

 

So as long as I keep one open my scores shouldn't take too much of a hit. I could just keep the smallest loan open and pay the regular payments on it for 10 years. It's only ~$429.

 

Should my primary goal be getting all of them under the orignal loan amounts first?

 


Yes. Then 89% then 79% and so on.


FICO8 EQ 760 TU 795 EX 764 Total revolving limits 661200 (551200 reporting)
Message 8 of 14
Valued Contributor

Re: Payoff of student loans and Credit Score

Thanks SouthJamaica & Revelate!




FICO 8 Scores
As of 2-1-19
As of 2-1-19
As of 2-1-19
Message 9 of 14
Moderator Emeritus

Re: Payoff of student loans and Credit Score

That all assumes they're at the same APR: if that's not the case start with the highest APR one first.

 

We're not talking scoring optimization for your initial paydown, we're talking getting out of debt the fastest.  As a result just keep throwing money at it and don't worry about breakpoints on individual lines: doesn't matter for installment utilization calculations at all actually unlike revolving.




        
Message 10 of 14