Student Loans and Credit Score
"Hello, my name is Jessica, I am 25 now and will be finishing school now..
Couple questions about student loans and credit.
So, do they affect the credit score?
I don't have any job right now, and I am constantly looking, how much time will I have to start paying them off?
I will have around $40,000 total of debt and just want to see how it will affect my credit because I plan on buying a home in the next 3 years.
Do student loans will hurt my credit?
Will I need to hire a a credit repair company so I have a score of 700 at least?
Lets say I find a job at 80k, how much should I pay them off?
Not sure what the interest is.
Anyway, thanks! and I hope I am in the right category!"
Hi Pink Unicorn (Jessica!)
I found your post on this thread, but I thought it would get more traction if it had its own topic and was in a different category. I hope you find the help you're looking for in our community!
I don't know the actual answer to this, all I have is my anecdotal account, but my husband has student loans closing in on $150k (😲 I know. That's what a masters in something you end up not doing and then a doctorate in something you do end up doing does to you if you started with no savings) and his credit score is in the upper 700s. Used to be in the 800s with all that debt until we bought a house.
Hi Jessica! Pink Unicorn
Usually, as long as you haven't missed payments, student loans don't bring down your credit score. When buying a house, your loan officer/mortgage company will use your amount of debt to figure out how much you can afford to pay towards a home (take a look at Debt to Income ratio). The default on most government student loans is a 6 month grace period (this can be different for private loans). The best option is to call your student loan company and see what your grace period is - hopefully, you won't be unemployed for long, but they can also go over options for deferment or income based repayment plans if need be.
How fast you pay them off will come down to your personal financial situation. Are student loans your only debt? You'll want to know the interest rate (the higher the interest rate, the more you save by paying them off early).
Good luck! :)
First, get a copy of your promissory note from your lender. This outlines your terms and conditions and will show you when your first payment is due. Then, once you have that, sign up on their website to access your account. You can then explore different repayment options.
A great resource to explain different repayment options is: http://www.finaid.org/loans/repayment.phtml
If you are going to consolidate, it is wise to NOT put federal and private loans together. Do your homework, read and research. Student loans are the biggest trap in the world. Knowledge is power so educate yourself. You need that promissory note, research everything you can about repayment options, don't rush into a consolidation (you only get one shot at it).
But, if you have to work at Starbucks to make those payments until you get a real job, do it. Deferment and forbearance will crush you with interest.
I don't mean to panic you but I have made ALL the mistakes. Just be smart about it. :-)
I have never seen my husbands student loans listed on his credit report, even when we got behind. Now, I cant say that's the norm, not sure but he had then when we met. I've never had student loans because my dad was 100% DAV which paid my tuition for the most part, I dropped out of college and later went back on my company's (at the time) tuition reimbursement program so I never incurred student loans. We went through some lean times back then with his student loans but let me warn you of one thing I rarely see people talking about as it relates to student loans. If you can definitely stay current, thats always best. If you can't stay current and are having trouble, be extremely aware of the options they offer you to defer/delay your payments. At the time, they may seem like a life saver (and can be), but also remember they are racking up interest on those payments that will balloon your balance in the end. Choose one if you must, but don't get too relaxed and keep it deferred too long. One last thing, for anyone that may be permanently disabled, you can request they forgive the loan, but you have to be 100% disabled. They will give you a conditional forgiveness, but will ck for 2 years to be sure it is permanent before the loan is totally forgiven - I applied for (and was awarded) that for my sister, a vet that has traumatic brain injury. I think they also have some programs to forgive them for service to underserved communities, but ck that out if interested. My sis in law worked at NIH as an admin and mentioned something like that to me years ago, but I've never personally looked into it. I dont know about anyone else out there, but I have never seen the student loans ever on the credit report even when late and I habitually ck all three reports even to this day, but still be safe because they can start adding them.
I didn't see this answered too well and just my unprofessional opinion, but I think most of those companies are not nice places. The advice given in this thread is more than enough to keep your credit clean. The only other thing one of those companies could offer is yet another loan to pay off other loans. That doesn't really help you in the long term. It might make your score go up getting caught up on payments, but you can do that yourself.
I don't know about all of you, but I'm like this, if N'm not interested in something, I have to really struggle to get it to sink in because I can't stay focused on it. However, if I am interested, I develop a laser focus on that particular thing and can't get enough of studying it. That's how I first discovered Ynab and understanding credit reporting. I got really mad about myself and my husband (no kids) not being in control of our budget when we should have been so MUCH further along financially. Once I took total control, things changed. I am NO expert, but when it comes to the credit reporting and why things are often different in the report is because they use different scoring models (and there are TONS of them!).
Different regions of the country also rely on different reporting agencies (i.e., I live in the southeast and the boss here is Equifax. if your equifax isnt high enough, you will never qualify, especially for a vehicle,
in the midwest, they use Experian more and in the west, it's Transunion. And, if that isn't enough, if you are trying to do anything with your home mortgage, they have credit reporting agencies that are specific to their industries or businesses, for example, CREDCO is for the mortgage industry and they use an entirely different scoring model in addition to the big three more familiar agencies.
I would never hire a credit 'repair' agency because they can't do a thing you can't do yourself without a little simple research. Like I'm sure so many Ynaber's have already mentioned, you need to get a copy of your report first, dispute everything on there that's negative (I did that anyway even if I knew it was legit because some of the reporting companies are too busy or lazy to refute the small stuff and by law if they
can't prove it's legit in 30 days, they have to remove it, I had a lot of little dumb stuff on mine, even a medical bill that was less than $20 that was already 6 years old but still would have stayed on because they won't usually remove it until the 7 year mark. At first, I did the online dispute, then I began calling each individual agency and had customer service rep fill out the form for me (yes they will do that, you only need to verify you are who you are by answering questions that will identify you to them). I cleaned alot up that way. Then, there were errors on there that I refuted that they cleaned up because the companies didnt bother. One was a big one though, a loan bank of america had put on there that I didn't recognize, and when I called them, they said their loan numbers don't even BEGIN with that type of loan
identifier, they told me to just dispute it and when they get it from the credit bureau they will let them know it's a mistake (that had been on there a LONG time too and I had never even bothered to look at my own report!). And let me tell you a little secret (at least it was to me), do you know you can negiotiate small stuff down and they will remove it within 30 days (REGARDLESS OF WHAT YOU'VE HEARD???).
I called a few small creditors (medical, and asked if they would remove it from my report if I paid the bill off, they said yes, I paid and they did, came off in 30 days!). I have educated myself so much on this stuff that I am now entering Super-Prime territory with my credit score now, I will soon be at the highest level you can reach now by taking control myself. If you rent, you can now get credit for paying your rent on time every month from your landlord that can be applied to help raise your credit score. Now, to me, it's actually become a game, it's gotten so easy. If you have missed payments, it's not the end of the world, in fact, you can cure that in about 4-6 mos. All you have to do is RAISE your score in the areas of the report that give you the most points. Know your utilization number. Keep your credit card utilization BELOW
30% at all times, right now, mine is 3% because I basically pay cash as I go for everything now. I could go on and on but won't because now I'm getting a little embarrassed for having written so much! But let me say one small thing about old credit, I know I mentioned going ahead and paying some off, mostly medical, if you owe other types, I wouldn't because that can harm you too, it's a delicate balance. If you receive a demand letter for an old debt (they have sold to a credit company for pennies on the dollar that they will come and try to demand you pay off, just flip it over and read the federal disclosure on the back. I had my score rockin so great once and rec'd an old one like that, it was for like $286. I panicked, and almost paid it until I read the disclosure on the back which said something like, "due to the age of this debt, it cannot by law be entered into your credit report." (For real, lol, KNOWLEDGE IS POWER PEOPLE). Just dig in and do it for yourself because you CAN.
oh, btw, I trained to work for a credit repair company when I was between jobs once, but decided against taking it. It was the top credit repair agency "Lex...." As I was going through their training, I realized what they were doing for people was exactly what I had been doing on my own (via research), but I did find out some interesting info they used in their sales pitch, like getting credit for paying rent on time if you rented ( which I didn't, but I didnt know that). I won't knock what they do because I'm sure they help some people that may not have the time to do all the research like I did (I only work PT now anyway), but if you do have the time, it's really not all that hard to do.
I came across your thread and wanted to shed a little insight on the topic and the questions that you were asking! Student loans can affect your credit score but negatively and positively, depending on your payment practices. If you're paying your loans with the minimum amount and on time, you will see that it can positively affect your score. On the other hand, if you happen to miss a payment or are late, that will negatively affect it.
Paying back students loans can be frustrating but I hope that bit of information you find helpful!