Credit Advice

Have a question? Have advice to share? The combined knowledge and experience of everyone in the Credit Karma community can help you. Enter your question or help others below to get started!

Question

Posted in Student Loans
Profile Image

Question By
vcaresup86

1 Contribution
5 People Helped
How much does Student Loan Debt affect your credit score
I have between $15,000 and $20,000 of student loan debt. I did not graduate and I am making about $2000 a month at my current job. I have 1 credit card with a $750 Limit and about 90% off it is utilized. I am currently paying down my credit card to a lower level but not completely. I recently consolidated my Federal Student Loans and changed the repayment plan to one that is dependent on my income. My first payment after the consolidation and the repayment plan change this month. I have settled all of my prior credit card debt and have no delinquencies for the past two years. The Credit Simulator does not show an increase in my credit score no matter what I input into it. After a few payments on my student loans, and once my settlements with old credit card companies show on my credit and my only debts on record are my current credit card (with on time payments) and my student loan debt (with on time payments) will my credit score improve steadily?

Your Credit Scores Should Be Free. And Now They Are.

View your scores and reports anytime.

SIGN UP NOW
All Responses

Result 1-1 of 1Results per page: 5 | 10 | 25Page 1 of 1   Previous | Next
Top Contributor
22 Contributions
134 People Helped
Most Helpful Response

Just my $.02 ...

Helpful to 23 out of 28 people

Hi ... I'm not an expert but I've researched and have a fair amount of exposure to this kind of question since I was in back-breaking debt not that long ago. So here's my analysis on your situation .... You have a great payment history (PH), which I'm sure that will only help you, continuing to do this will improve that part of the equation as well as the aging of your credit history (AAoA). Also, you have a good mix of credit which will help. Also, installment accounts such as student loans and viewed my the scoring models as higher quality debt, than credit cards.

What seems to be stinging you is a couple of things .... 1) Account Utilization is high .... you get a drop in score when you use more than 30% of your revolving credit lines, you also get majorily punished if you go over 60% and then again at 90% utilization (this is not just one hit - but three). Have no fear since I believe paying down your credit card will help, assuming that is the only revolving credit. 2) "Debt Settlement" - has me concerned since this might be classified as a "charge off" on your credit report (CR). Meaning that you didn't pay the original amount in fall. If you did pay in full, there isn't anything to worry about. But charge off's can count like short sales or forclosures in terms of the damage they do - they stay on your CR for seven years, although after two years the worst damage is done and you'll start to see an improvement. Also, to add to the misery, you are then sometimes taxed on the "charged off" amount and sent a 1099-C at the end of the tax year.

Don't fret, I had four 30 day late pays, about two years ago and my score is now considered "excellent" if I can do it - so can you, trust me. Also, keep in mind credit reports only provide a snapshot over the last couple years, like the proverb "time heals all wounds ..." as cliche as it sounds, its so true.

Reply by
vcaresup86

1 Contribution
5 People Helped
Helpful to 5 out of 10 people

Thank you for your response.  I had settled 3 credit card accounts below the amount due, but they were all under $1500 so I won't receive a 1099-C for those.  I have also paid off a car loan within the last year.  I was not aware that charge offs for the settled debts would affect my score so negatively.  But I guess the damage is done.  Is there a way to make those marks on my credit report not be so negative since they were paid?  

Now that my Student Loan payments are set up with a payment that I can afford and with that I will have a very solid Payment History going forward, if I lower my credit card balance to about 30% of my limit, would that result in a bump in my score?

I also have a fairly large private student loan that was charged off, however I never received a 1099-C for that and I haven't been contacted in regards to that for over 3 years at this point.  I know that there is a chance I can dispute that on my credit report and if the holder can't verify the debt that could be removed.  Is that true and since I haven't received any contact or notification or tax form for that, do you think there is a good chance that could be removed with a dispute?

Result 1-1 of 1Results per page: 5 | 10 | 25Page 1 of 1   Previous | Next

Your Credit Scores Should Be Free. And Now They Are.

View your scores and reports anytime.

SIGN UP NOW

Reply to this Question

Write your response:
Enter Your Comments

The Credit Advice pages of the Site may contain messages submitted by users over whom Credit Karma has no control. Credit Karma cannot guarantee the accuracy, integrity or quality of any such messages. Some users may post messages that are misleading, untrue or offensive. You must bear all risk associated with your use of the Credit Advice pages and should not rely on messages in making (or refraining from making) any specific financial or other decisions.