@smile90000 wrote:Long story short. I have become permanently totally disabled and am now eligible to have my student loans forgiven as soon as I fill out the paperwork.
The problem is I am in the process of looking for a house rental that better fits my physical needs and a car that will work with my disability.
But I am very concerned about how low my score will drop once my student loan balance goes to zero and wondering if I should wait to complete the discharge forms.
- My student loan is currently my only installment loan
- The oldest credit card on my account is just shy of 30 years
- My scores are 790, 787, 806
If the likelihood that it will drop 10 or more points is high, I will just wait (sigh) until I've found housing and got my car, before doing the discharge.
Anyone have experience with how large of drop your score takes when your last installment loan goes to zero?
I don't have the kind of experience you're asking about, but just bear in mind that the big drops in scores due to payoff of installment loans come in the FICO 8's and 9's, not in the mortgage scores. So it wouldn't have much effect on your mortgage rates.
Also, your scores are sufficiently high that a drop from paying off installment loans is not likely to ruin your auto loan rate either.
You are also going to pick up some points by having one less account with a balance.
But of course it's never unreasonable to simply avoid big changes in the runup to important credit applications.
@smile90000 wrote:looking for a house rental
are you trying to get a mortgage or pass a landlord's credit screening or get some other type of loan?
I can't imagine the credit score negatives of getting the balances paid off (especially if they are particularly large) outweigh the positives of not owing those balances anymore, particularly when that funding is coming from total disability discharge.
Who is running your credit for your house rental, ask them what they look for, is it a specific score/DTI metric? I highly doubt there are housing options you can get now that you won't be able to get once all of your loans are paid to $0
When I did my TPD discharge I had 4 student loans on my report all go to zero. My score change? 3 points.
I think you will be fine. My scores were all in the mid 600's though, so you *might* see a bigger decrease, but tbh my scores recovered so quickly I hardly even noticed and I doubt you will too. Your DTI will look way better and the overall benefits are going to far outwiegh any impact youre worrying about. There is a reason this is highly sought.
Best of luck to you and your home / car search!
EDIT to add: I found a lot of good information in the student loans section of the forums. There are a lot of great posts there about student loan forgivness and TDP discharges. You might find better answers there.
@smile90000 wrote:I am not buying at this time but looking to rent a home. So passing a landlords screening is important.
I think I am just worried because the last time I looked for an apartment my scores were in the 740s (a year ago) and think it hurt me. My scores are higher now (I've paid off most of my medical debt), but the housing market here is very competitive so I'm just trying to make myself look as good as possible as I will be dealign with private landlords (not apartments)
I'm thinking that I agree with @Thomas_Thumb that the improvement in DTI which would be achieved by paying off the student loan will make you a better, not a worse, candidate.