Does consolidating your student loans hurt your credit


11-Jun-2017 14:25

As a student loan lender, we get a lot of great questions about how student loans affect credit score. The answer depends on whether you’re talking about federal or private student loans.Federal loans don’t take credit scores into account, which is why every borrower gets the same interest rate regardless of financial profile.Unfortunately, FICO calculates your credit score is kind of a black box.While the various factors and weightings used in the calculation are publicly available on FICO’s website, its algorithm is proprietary, which means that no one can predict exactly how a specific financial event will affect your score.If you really want to avoid inquiry overload, do your homework before applying for a loan.Private lenders typically list online the range of rates they offer, as well as general eligibility criteria.You can’t get a loan without an eventual inquiry, but this service allows you to compare interest rates worry-free before applying for a loan.

Student loans are the ultimate double-edged swords.For example, refinancing may lower your monthly payments, making it less likely you’ll miss or be late with a payment.And if you refinance federal loans with a private lender (in effect, turn your federal loans into a private loan), rest assured that credit bureaus don’t view these two types of loans any differently.But remember, there’s absolutely nothing your lender can do to help if you don’t return their calls.



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