Is there a negative effect on my credit history if I refinance my student loan? I keep getting mailers...?

Question

I don't owe that much, and I have no trouble with my current monthly payment. I don't want to refi if there's a negative impact on my credit.

Answer 1

Given the fact that you don't owe much and don't have trouble with the current payment, there is no compelling reason to refinance unless you can get a lower interest rate, which would reduce your total outlay to the bank. This would be surprising to me, since interest rates have actually be rising of late.

And there might be a slight temporary dip to your credit score because of the necessary inquiries, but nothing to worry about. The refi intelf would have a negligible impact. So you real question should not be if it would impact your credit score, but if there's any tangible benefit to refinancing at all.

Answer 2

The more you apply for credit, the lower your score. Be careful and only apply to those that you are really interested in. But it isn't going to show negatively- it just lowers it a few points. The few points is only crucial if you are on a border line of tier 1 or tier 2 credit and you are about to purchase a car or home. If you are refinancing and lowering your Debt, or getting better interest rates, after about 4 months, it may actually improve your credit. The thing they look for is that your credit cards are not above 30% of the available balance. So if you have $1000 available credit card debt, and you have more than $300 owed on those- that will decrease your score dramatically. Be careful on student loans if they are deferred. If they are deferred you are not making payments, and many times the creditor will note "no payments made" which is in agreement, and you are not in default- but it makes it look late and that can hurt you. Pull your credit regularly to make sure they do not report it incorrectly- it is a bi*ch to Fix!!!

Answer 3

I put your question to the experts using my Financial Helpline which is one of the many benefits members of the Financial Freedom Society enjoy. Here is their answer:
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If you have a good credit rating and can refi your student loan to get a lower interest rate without having to contact a number of creditors, it is probably a good idea and will not have a significant impact on your credit score. Refi activities, typically, are only a small component of the credit scoring calculation. You can review discussions and suggestions on debt refinancing, credit scoring, and related topics at the following websites, which discuss the credit score components:

* 35% punctuality of payment in the past

* 30% capacity used: the ratio of current revolving debt (credit card balances, etc.) to total available revolving credit (credit limits)

* 15% length of credit history

* 10% types of credit used (installment, revolving, consumer finance)

* 10% recent search for credit and/or amount of credit obtained recently":

http://www.debtsmart.com/pages/article_refinancing_and_credit_score_030212334.html

http://en.wikipedia.org/wiki/Credit_score#Makeup_of_the_FICO_score

http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre03.htm

http://moneycentral.msn.com/content/CollegeandFamily/Moneyinyour20s/P73746.asp

http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx?fire=5

http://www.myfico.com/CreditEducation/CreditScores.aspx?fire=5

-Financial Helpline Counselor
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The Financial Helpline is just one of the many benefits available to members of the Financial Freedom Society. FInd out how to get your own membership by visiting http://your.ffsi.com/59173.

Warm regards,

Darren J Smalley
Independant Membership Consultant
Financial Freedom Society
http://www.ffsi.com/59173
"A Financial Health Club"

Answer 4

It will not affect your credit score if you consolidate your student loan. Be careful if you consolidate, certain banks and financial institutions have "fine print" on the terms.

I personally consolidated through Citibank. My monthly amount lowered almost 40%, but the negative effect is that I just extended my debt years. To prevent that from happening, I still pay the same amount before I consolidated. The extra payment goes directly to the principal.