Consolidating student loans credit score
Invest wisely in your education, and those loans should pay off in the form of higher income over time.But if you mismanage student loan debt, your credit score could suffer—and that could have a big impact on your financial future. Do I need a good credit score to take out a student loan?Instead of making multiple payments to multiple lenders, the borrower only has to pay off the new consolidation loan, says Michelle Pezzulli, vice president of operations for Credit Union Student Choice, a student lending service provider in Washington, D.C."That new loan will have its own interest rate; it will have its own repayment terms; it will have its own terms and conditions," she says.It is not unusual to owe money to 8-10 separate lenders, maybe more if you had a combination of private and federal loans.If you continue borrowing for graduate school, it’s easy to add another 4-6 lenders to the mix. We’ve got you covered with our Student Loan Smarts blog series.Our expert tips and hacks will help you save money, pay off loans sooner, and stress less about student loan debt.
In other words, the better your score, the better your rate. Consolidation provides grads with the ability to combine their student loans into one megaloan, but it comes with drawbacks. Along with gaining a new degree, many graduates will also leave campus with new student loan payments they'll have to fit into their post-graduate budgets.Even if your rates seem high, t he Department of Education puts a cap on consolidation loan rates at 8.25 percent.One major advantage of federal consolidation loans is that borrowers don't need a stellar credit score to qualify, they can apply any time (even if their loan is in default) at Loan gov, and they'll always get a fixed interest rate.
Having more accounts is not automatically a negative factor in your credit history.