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mbrown189

Paying off Student loans and credit score effects?

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Will I see any big jump in my score a few months after I have paid off 3 student loans totaling $16,000 early? I hear that paying them off early hurts vs helps, not sure how much truth there is to that?

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paying off students loans -- or any installment account -- has very little impact on FICO scores. I am not sure where you heard it hurts to pay them off early. screw FICO and save $$ on interest and pay them off asap.

 

moreover, having them paid off will improve your DTI.

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Just was curious because I will still have a car loan which I will be making pymts on, and it also being an installment loan category.  Was hopping it would also have a nice impact on my score overall. I know it will make the DTI look amazing, which is always a bonus. 

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Posted (edited)

If you have been making payments on time and have other open accounts it probably will not have any impact if you pay the loan off.  It is different from  paying off a credit card which has a limit and affects your available credit.  Keep in mind that the student loan is tax deductible if you itemize your taxes, so unless you got a great rate on the car loan it may make more sense to pay down the car loan before the student loan.

Edited by TrainerC

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7 hours ago, TrainerC said:

 Keep in mind that the student loan is tax deductible if you itemize your taxes, so unless you got a great rate on the car loan it may make more sense to pay down the car loan before the student loan.

There is nowhere near enough of an impact for MOST people on taxes to justify dragging out loan re-payment for the sake of a few FICO points.  Some people will see precisely ZERO impact on taxes from that interest they are flushing down a toilet...

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11 hours ago, TrainerC said:

Keep in mind that the student loan is tax deductible if you itemize your taxes

With the latest wealth redistribution scheme, most people will not benefit from itemizing since the standard deduction is now so high.

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On 10/7/2019 at 5:33 AM, TrainerC said:

If you have been making payments on time and have other open accounts it probably will not have any impact if you pay the loan off.  It is different from  paying off a credit card which has a limit and affects your available credit.  Keep in mind that the student loan is tax deductible if you itemize your taxes, so unless you got a great rate on the car loan it may make more sense to pay down the car loan before the student loan.

It's also only tax deductible if your income is under a certain level, and it's only up to $2500 you can deduct. It's hardly worth it for the majority of people, as the interest they'll save in the long run will be well over what they'll save in taxes.

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