further clarification on paying down student loan

[FirstAscent]

One of the things FICO says is bringing my scores down is "The remaining balance on your mortgage or non-mortgage installment loans is too high."

From doing research it seems the magic number is 8.9% or below for your balance. I'm currently way off from that and due to not understanding things (my fault) and multiple deferments I currently owe a LOT more than the original balance. The original balance was about $20k and I owe about $26k, so my current balance is around 130%, way off from 8.9 haha.

Could I potentially expect a score increase if I get the balance below 100%? If so what's probably the minimum amount I'd want to try to get to in order to get a score bump? just below 100% or would I want to shoot for below 90% or something?

Even if I could get 10+ points from it, that's worth it to me. If it were only 5 points, then I'd probably hold off.

[Anonymous]

I’m in a similar situation as you, owe about $26,000 on three NAVIENT loans, and my high balances were reporting my original balances, which are significantly lower than my current balances (due to loan rehabilitation and them tacking on collection fees). I disputed the  high balances with the three credit bureaus and they quickly changed my high balances to $0, which isn’t very helpful.

I called NAVIENT (twice) and they are researching the balance history on my account and they said it will take until April 29th to get it done. I’m a little uncertain from what the CSR told me if they are going to update the CRAs when they get done or if they will send the info to me and then I will have to mail it to NAVIENTs credit reporting departments.

Point is, it might take a couple of months, but you should be able to get the CRAs and NAVIENT to update your student loan high balances to report the actual high balances.

[FirstAscent]

Hmmm, I didn't think about that, but that sounds much easier than coming up with a large payment to bring the amount down haha

My student loans are all with Nelnet but I'll contact them first and see if they can update my high balance.

[Anonymous]

Our OP writes:

"The original balance was about $20k and I owe about $26k...."

If I understand our OP rightly, his High Balance and Current Balance are in fact reading correctly on his reports.  I.e. his Current Balance reads 26k and the High Balance field reads about 20k.

Can he confirm?

If so, his reports are right.  The "High Balance" field for a loan is the CRA's way of indicating the original loan amount.  If any of the forum veterans who read this thread understand it differently, please let me know!

It's possible that Frencheese's intuitive understanding is right, which is that for all accounts, installment or revolving, the HB field should simply be the highest balance that the account has ever had.  And therefore in theory it should never be possible to have a current balance > the high balance.

Let's suppose for just a second that HB for loans is supposed to be the original loan amount, even if you owe more now (common for student loans).  I don't think we have any definite evidence that a person will get a score boost from going from > 101% to < 99%, though a few people have made that as a conjecture. 

My personal advice is not to worry about it too much.  Just make your payments on time, pay the loans down if that makes sense financially but don't pursue that as a scoring issue.

Our friend frencheese can keep you updated on what happens with his attempts to get the CRAs to change his HB to his current balance.  I'd wait to hear what happens with him before pursuing anything on your end.

[Anonymous]

Absolutely, it will take a few weeks, but I’ll let everyone know what happens.

[FirstAscent]

@CreditGuyInDixie you are correct. If the High Balance is simply the original loan amount then everything is showing accurately on my reports. and yes I'm simply only wanting to pay it down for scoring purposes only. But as you mentioned, if I wouldn't expect much of an increase in points then I'll just keep paying my monthly payments on time.

I'm wanting a new auto loan in the near future so looking for any extra points possible to get a better APR and saw this as a potential opportunity that was worth looking into =)

Curious to see what Frencheese finds out in a couple/few weeks as well.

[Anonymous]

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@FirstAscent wrote:

I'm wanting a new auto loan in the near future so looking for any extra points possible to get a better APR and saw this as a potential opportunity that was worth looking into =)

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How many credit cards do you have?  Do you have all your cards reporting at zero except one?  That strategy (AZEO) is what most people here employ prior to an important loan app.

[FirstAscent]

I only have one card right now and actually just paid it down to 1% util, got about 30 points that posted up two days ago. So not much more I can do there =) I've read about AZEO, if I had more cards I'd definitely do that too. I guess technically I'm still doing AZEO haha but not getting the extra benefit of having multiple cards and doing AZEO.