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Posted in Student Loans
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Question By
cody70094

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Building Credit. How quickly should I pay back Student Loans?
I am 22 I have "Fair" Credit. I would Like to buy a House within the next 2 years. My question is would it do my credit better to pay off the loans within a year and a half or should i continue to pay the minimal payments? I know paying off the loans quicker will lower the amount of interest I pay and that's good but will it look better on my credit to pay it off? $9,000 is the amount of debt I have.

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Milk those bad boys all the way to home owner ship...

If you pay them off then they get closed, this hurts your credit score... Also $9,000 is a hell of a good down payment!, if you finance more than 80% loan to value you are going to have to pay for Mortgage Insurrance, so you MUST have atleast 20% down and I would argue 40% down as a better goal. 

Student Loans are the best kind of loans to lenders so long as you are paying them on time. They will effect your debt to income ratio, but having a good downpayment will go a long ways towards removing that fear in the underwriters eyes.

Pay the minimums, buy the house, then pay off the student loans, but be aware, they may be some of your oldest accounts, so paying them off all at once will be devistating to your credit score.

I would argue that paying off one every 6 months is a safe method to mitigate the damage. Typically pay off the smallest loan (total, not interest rate) first, and work your way to the next smallest. This will help prevent just paying the minimums causing multiple loans to close within the same 6 month time period. Play with loan repayment calculators and come up with a plan.

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