A growing student loan debt can deter a lender, such as for a mortgage, from loaning to you, according to Money Crashers. In any situation, putting a loan in deferment is better than not making payments.
Deferments aren’t an option for every loan or every situation, but if you’re experiencing an economic hardship, it’s something to explore. Working hard, making extra payments, and paying off your student loan balance will help your credit, right? Paying off your student loans too quickly can actually bring your score down, according to All
Having multiple types of credit, such as a loan and credit cards, can improve your credit.
Once your loan is paid off, you’re eliminating that type of credit.
However, the types of credit you have only constitute 10% of your score, whereas the total amount you owe counts for 30%.
So keeping that big student loan balance around, especially with a lower income ratio, is going to hurt you.
On the other hand, consolidating could mean you lose certain borrower benefits (e.g., student loan forgiveness, deferments, flexible payment plans), lengthen your repayment period, and even end up paying more over time.
But does it negatively or positively affect your credit?Student loan consolidation can negatively affect your credit because, just like applying for any other type of loan, it’s going to show as a hard inquiry on your credit history.According to Equifax, this “ding” can lower your score by a “couple of points,” which remains on your credit report for two years.So even though it could lower your score initially, keep in mind that paying off a student loan earlier means you’ll pay less in interest overall.It’s also going to decrease your debt-to-income ratio.If you miss one student loan payment, even by a day, your loan will be considered delinquent. If you don’t make a payment on a federal loan for 270 days, your loan is considered in default.