Does consolidating student loans help credit score
Another thing to note about deferments and loan repayment is that if your student loan becomes delinquent, you may no longer be eligible for a deferment. Once your loan is gone, you’re no longer making those monthly payments on time, thus ending your positive payment history on your credit report.A Huffington Post article explains that yet another way in which paying off your student loans can damage your credit is by reducing the type of credit you have.
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
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?
There are many pros and cons of student loan consolidation.
On one hand, consolidation could make managing your loans easier by only paying one lender each month, potentially lowering your monthly payment, and even having a chance to lower your interest rate depending on any credit improvements since you took out the loan.
Having a loan in default is going to be a huge red flag to possible lenders, not to mention to landlords when trying to rent an apartment, utility companies, or even a potential employer in some cases.