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How does student loan consolidation affect your credit rating?

I’m almost positive I am going to consolidate my student loans from college because the repayment starts soon, and it seems like my best option. I’ve heard that it’s also supposed to raise your credit score immediately. Is this true? How much of an impact does it really make?

Thanks!

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4 Responses to "How does student loan consolidation affect your credit rating?"

  1. i need stafford says:
    i really forget sorry
  2. t D says:
    With years in the credit industry:

    Yes, it will help. It will indicate several debts as being paid off, even though you have a newer debt that is larger.

    The more positive credit you have, the better your score. Also note that when you pay the debt down, your score will also increase. This is because the less debt that is present (compared to the limit), the better your score.

  3. Student Loans says:
    Hi There,

    You are absolutely right… Your credit can be greatly increased immediately by consolidating…

    The reason is as follows..

    Picture your situation if you dont consolidate.. You have say 10 loans, all with a different monthly payment ans interest rate all of which obligate you to a minimum payment each month..

    So, the way the credit bureau’s see it, you have alo tof obligations each month to pay for, which gives you a high DTI or debt to income ratio…

    Now, once you consolidate, it does manyu thngs… First and foremost, it comnines the multip-le loans into one large loan… The one large loan will have a SIGNIFICANTLY LOWER monthly payment which is huge in determining your credit score…

    So, the answer is YES it woul have an immediate impact on your score.. It could raise it as much as 100 points depending on your credit situation…

    The next question you should be asking is where to go to get the best rate for consolidation..

    The thing that most people dont realize is that the Department of Education regulates and determines EVERYTHING about the consolidation process..

    Every lender has the exact program to work with ther eis no difference in the type of qualifications from one lender to the next because we are all administered by the departmen tof education..

    The ONLY difference BETWEEN LENDERS is the department of education chooses ALL RATE DISCOUNTS offered to students…

    Currently the government only offers 3 rate discounts.. Most lenders (sallie mae, nelnet,) choose to only give 1 or 2 of the rate discounts (because they lose $$ by giving)

    My company is a little different.. To set ourselves aside from the rest, we offer ALL 3 RATE DISCOUNTS TO CLIENTS..

    It actually adds up to 1.85% OFF YOUR RATE FOR CONSOLIDATING…

    Other lenders will only offer yo to 1-1.25% off…

    I am a licensed student loan advisor with Student Aid Lending, we are a nationwide title IV lender administered by the Department of Education… I would be happy to assist you with the consolidation process..

    Take a look at my yahoo 360 profile.. There is alot of helpful information there for anyone to view.. You can also find the direct link to my website..

    http://360.yahoo.com/my_profile-hluduhmi

    It is actually a VERY SIMPLE process, it can be completed in 10 minutes over the phone and internet…

    Feel free to call or email me at any time.. Im available at all tiem to answer any questions or concerns you may have..

    I hope this helps!

    Jason Fry
    Student Aid Lending
    1-800-964-0642 ext 114
    jasonf@StudentAidLending.com

  4. Financial Aid Podcast says:
    Credit scores are numerical indexes based on an algorithm developed by Fair Isaac Company, called a FICO score. Scores are negatively impacted by events such as late payment, incomplete or partial payments, defaults, and judgements or liens, and range from 300 to 900. The actual algorithm is a trade secret of Fair Isaac, but the following breakdown approximates the weighted values that compose your score.

    35% Payment history
    30% Outstanding debt
    15% Length of your credit history
    10% Recent inquiries on your credit report
    10% Types of credit in use

    Now, consider this: student loan consolidation affects both your payment history and your outstanding debt, particularly in terms of number of loans outstanding. Federal student loans are often issued in subsidized and unsubsidized sub-loans, and new loans are issued each year. If you have only Stafford loans in college, you could graduate with 8 loans (4 subsidized Stafford loans, 4 unsubsidized Stafford loans) on your credit history, and those loans would have no payment information on them because you’ve made no payments (you were in school).

    8 loans for 4 years with no payments doesn’t look like responsible borrowing to a computer that processes credit scores. Remember – computers do the vast majority of credit decisions today, not living, breathing human beings.

    If you consolidate, those 8 loans are paid off and one new consolidation loan is opened in your name. Now you have a payment record on those 8 loans – and they’re all paid off. Again, to the computers of the world, this looks great! As a result, your credit score will increase when you consolidate.

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