“It’s impossible to say if or how much repaying student loans will affect your credit score.
It depends on the individual’s unique credit history and the particular scoring model being used,” says Griffin.
But that doesn’t mean that you should hold onto student loans for the sake of your credit.
Paying off your student loans can free up your extra money and lower your debt-to-income ratio, which also benefits your financial situation.
Paying off your student loans as soon as possible makes a lot of financial sense, but be aware of how it may affect your credit score.
You could potentially see a slight drop in your credit score, but probably not a significant one.
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If you pay off your student loans and no longer have an installment loan in your credit portfolio, but you’ve made on-time payments on your student loans, that will reflect positively on your credit score.
Please do your homework and let us know if you have any questions or concerns. Shouldn’t this wonderful occasion be celebrated with a bump in your credit score, and not a hit to it?
It comes down to this: your student loans are considered installment loans, which adds variety to your credit portfolio.
While 10 percent may not be a lot in the big picture, if you’re like me and don’t have a lot of other credit history and lack a diverse mix of credit, you may see a slight decrease in your credit score, like I did.
So, while paying off your student loans early makes financial sense, it doesn’t directly lead to a better credit score.