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  1. #1
    Registered User New Member
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    Apr 2013
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    How much will paying off a student loan help my credit score?

    I currently have two student loans with the same company that I have been paying down for the past five years. One currently has a balance of about $4,500, and the other is currently at $500. I have mainly just been making the monthly payments but every now and then (whenever I have some extra $) I have been using it to try to pay down the balances faster. Right now I could probably scrape together enough to pay off the remaining balance on the smaller loan. I am in the process of getting ready to apply for a mortgage but my credit scores are still in the 600's. Do you think my credit scores would increase if I did this, and if so by how much?

  2. #2
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    I can only speak from personal experience, but when I was in the process of buying my condo, my mortgage broker told me not to pay off any debts (or take out any new debts/apply for any new credit cards) when I was in the process of being approved for the mortgage.

    It's my understanding that it takes a period of time for the debt to show up on the credit bureaus as being paid in full. So if you plan to apply for the mortgage soon, the $500 loan likely wouldn't show up as paid in full immediately, and thus wouldn't necessarily increase (and might hurt) your credit score.

    I'd say wait to pay off that debt and keep paying your regular payment until after the mortgage is finalized. It's often better (from a credit score perspective) to show a consistent history of on-time payments, then to pay off debt. Your credit score is a basically the creditor's way of predicting your ability to borrow and pay back money, based on past experiences doing so.

  3. #3
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    Thanks for taking the time to answer my question. Now I'm just hoping that the payments that were more than the minimum due in the past didn't hurt my score more than help it. Kind of counter intuitive so I am glad that I asked!

  4. #4
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    No problem. Generally paying off more than the minimum on your debt is definitely a good thing so I don't want discourage you from doing so in the future; I would just hold off on paying off the loan in full until your mortgage is approved. Good luck with your purchase!

  5. #5
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    Does this apply to credit cards to or just student loans? I am trying to increase my credit score so i've been paying my full credit card balance off each month but have not seen any results.

  6. #6
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    Thanks for your question. I had suggested Antidebt not pay off his/her student loan until after obtaining the mortgage he/she wanted. If you aren't in the process of trying to obtain a mortgage, paying off your credit card balances is a good way to increase your score. Unfortunately, there isn't a quick or easy way to increase your score, but managing your credit cards responsibly; including paying your bill on time, keeping your debt to available credit ratios low should increase your score over time.

  7. #7
    Moderator CreditDave's Avatar
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    Quote Originally Posted by horses3000 View Post
    Does this apply to credit cards to or just student loans? I am trying to increase my credit score so i've been paying my full credit card balance off each month but have not seen any results.
    You still want to carry a small balance. Paying off the full balance each month will not hurt your score but won't improve it as much as showing that you can pay down a balance over time.

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