Should I consolidate Student Loans that are well over 100% utilization

[Anonymous]

I have a total of 7 student loans with NELNET that have been in forberance for quite a while now and the balances are well over 100% utilization.   I currently owe $208,000 and utilization is 140%.    What impact should I expect to see on my 5, 4 & 2 scores if I consolidate with NELNET?   I don't think they'll  pull a credit check and  I can eliminate 6 installment loans and bring my utilization down to 100% although I'll have a new account.     My current 5, 4 & 2 scores are 670, 678 & 653.   I am looking to get a mortgage in 7-9 months and need a 700 score.  Will this help?   Thanks.

[Anonymous]

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@Anonymous wrote:

I have a total of 7 student loans with NELNET that have been in forberance for quite a while now and the balances are well over 100% utilization.   I currently owe $208,000 and utilization is 140%.    What impact should I expect to see on my 5, 4 & 2 scores if I consolidate with NELNET?   I don't think they'll  pull a credit check and  I can eliminate 6 installment loans and bring my utilization down to 100% although I'll have a new account.     My current 5, 4 & 2 scores are 670, 678 & 653.   I am looking to get a mortgage in 7-9 months and need a 700 score.  Will this help?   Thanks.

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It would still be a new account and mortgage scores do not like new accounts, even if there is no HP.

It would reduce number of accounts with a balance, which mortgages like, but I am not sure the new account cost would be outweighed by having less accounts with a balance.

Being over 100% may have a penalty, but they do not have the same thresholds as revolving tradelines.

Really the buggest benefit would be paying the SLs down significantly.

I would be reluctant to consolidate when buying a house in the same time frame.

Maybe others will have different opinions.

Good luck!

[Anonymous]

Thanks Boss.    I'll need it.   I just didn't know how much the 5,4 & 2 scores were penalizing me for being over 100%

[Anonymous]

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@Anonymous wrote:

Thanks Boss.    I'll need it.   I just didn't know how much the 5,4 & 2 scores were penalizing me for being over 100%

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I don't believe that the penalty for being over on installment utilization is that severe. My wife's student loans were well over 100% utilization for several months, she just refinanced her loans and saw no score change on her mortgage scores.

As mentioned, a new account is likely to have more of an impact on your score. Plus most bank underwriter's do not want to see new accounts opened (even if it is a consolidation account) less than a year before your mortgage. The 700 score seems like a specific target, are you already wrking with a loan officer? Finding a solid loan officer to work with can be more advantageous for your approval than getting your scores to an arbitrary target number. This is what we did before my wife secured her mortgage, we worked with a loan officer, did everything in our power to improve her credit, and followed the advice of our loan officer perfectly (it was a lot of hoops to jump through). Even though my wife's middle score was the bare minimum needed to qualify for their mortgage product, our loan officer was able to get us better rates because of the relationship we established with them and in turn the financial institution.

[Anonymous]

Thank you AJ.   Yea we are but I really dont think she is the best.   When I asked her about the consolidation, she said it sounds like a good idea but her system isn't sophistaced enough to tell me if that would help or not.   

Also, about the AZEO.   I have 24 credit cards all of which I thought I was paying off every month with the exception of 2 which I carry an under 10% utilization.   Like I said I thought I was paying off.  I reciently found out that the annual fee I agreed to pay was being charged on a monthly basis. To top it off, it's charged on the last day of the statement period when the statement is reported creating an impossible zero balance report.   I can't over pay and create a negative balance so each month they are reporting a $5-$10 balance.   I've asked them to change the reporting date, but they all tell me that if they changed the statement date the monthly account fee would change as well and no matter what I do the credit card will always show a small balance.   That must be killing my 5,4 & 2 scores having 24 cards and over half of them reporting balances even though the total utilization is under 10%.   Should I just close the cards that are charging a monthly fee?  Current available credit line is $45,000 and Utilization is $3,500 (7.77%).  How would that effect my 5,4 & 2 scores?

[SouthJamaica]

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@Anonymous wrote:

Thank you AJ.   Yea we are but I really dont think she is the best.   When I asked her about the consolidation, she said it sounds like a good idea but her system isn't sophistaced enough to tell me if that would help or not.   

Also, about the AZEO.   I have 24 credit cards all of which I thought I was paying off every month with the exception of 2 which I carry an under 10% utilization.   Like I said I thought I was paying off.  I reciently found out that the annual fee I agreed to pay was being charged on a monthly basis. To top it off, it's charged on the last day of the statement period when the statement is reported creating an impossible zero balance report.   I can't over pay and create a negative balance so each month they are reporting a $5-$10 balance.   I've asked them to change the reporting date, but they all tell me that if they changed the statement date the monthly account fee would change as well and no matter what I do the credit card will always show a small balance.   That must be killing my 5,4 & 2 scores having 24 cards and over half of them reporting balances even though the total utilization is under 10%.   Should I just close the cards that are charging a monthly fee?  Current available credit line is $45,000 and Utilization is $3,500 (7.77%).  How would that effect my 5,4 & 2 scores?

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The particular problem you mention could easily be solved by pushing, rather than pulling, your payment, and paying enough over to cover the fee.

But absolutely you should close that card!!!!

[Anonymous]

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@Anonymous wrote:

Thank you AJ.   Yea we are but I really dont think she is the best.   When I asked her about the consolidation, she said it sounds like a good idea but her system isn't sophistaced enough to tell me if that would help or not.   

Also, about the AZEO.   I have 24 credit cards all of which I thought I was paying off every month with the exception of 2 which I carry an under 10% utilization.   Like I said I thought I was paying off.  I reciently found out that the annual fee I agreed to pay was being charged on a monthly basis. To top it off, it's charged on the last day of the statement period when the statement is reported creating an impossible zero balance report.   I can't over pay and create a negative balance so each month they are reporting a $5-$10 balance.   I've asked them to change the reporting date, but they all tell me that if they changed the statement date the monthly account fee would change as well and no matter what I do the credit card will always show a small balance.   That must be killing my 5,4 & 2 scores having 24 cards and over half of them reporting balances even though the total utilization is under 10%.   Should I just close the cards that are charging a monthly fee?  Current available credit line is $45,000 and Utilization is $3,500 (7.77%).  How would that effect my 5,4 & 2 scores?

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If you are in a position where you don't need cards that have an AF, you should definitely close those accounts. You will still get the age benefits of the cards (for the next 10 years, possibly more). Now if the AF cards make up the majority of your credit limit and you have to carry a balance, then that could create utilization issues. What would your utilization loo like if you cancel all of your AF cards?

If possible, you should try to get only one card reporting a balance and for the utilization on that card to be less than 30% and your overall utilization to be less than 10%. Ideally, you would want the reported balance to be $10, as there has been evidence that some profiles respond to under 5% utilization and there are balance thresholds as well that may earn you points if you can get under those.

[Anonymous]

Thanks.  The total amount of credit line on those AF cards is probably under $5,000 and I could easily payoff the balance of the one card so I only have one reporting.  Should I keep a 7% utilization on that one card?   And I am an AU on my wife's Macy's card.  $8,300 credit line with a $100 balance.  Basically zero.  Should I just pay that off?   
Thanks again.

[Anonymous]

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@Anonymous wrote:

Thanks.  The total amount of credit line on those AF cards is probably under $5,000 and I could easily payoff the balance of the one card so I only have one reporting.  Should I keep a 7% utilization on that one card?   And I am an AU on my wife's Macy's card.  $8,300 credit line with a $100 balance.  Basically zero.  Should I just pay that off?   
Thanks again.

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7% utilization should be fine. Some people will say that it needs to be under 5% or even under $100 balance for the optimal score. This seems highly profile dependent though, some people' profiles see small point increases for this others do not. If you have the means and the time, you can play with different utilizations and balances to see which is optimal for your profile. For mortgage scores you will want the least number of accounts reporting a balance as possible, so that would mean keeping the Macy's card at a 0 balance. There is an AU all zero penalty for FICO 8, so those scores will drop if the AU account is at a zero balance, but since your goal is the mortgage your F8 scores don't matter.

[HeavenOhio]

@Anonymous, it looks like you'll need every single point you can find come mortgage time. Unless you've tested to find out the exact amount at which you're dinged, I'd report a tiny balance on one card — at least $5 but not much more — with the rest reporting zero. Get this in place during the weeks before your mortgage process starts, and maintain that tiny balance until you've closed.