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DMorlak

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Student Loans VS Credit Score? Asking on behalf of my wife...
Last month my wife paid off her student loans, which we assumed would be a good thing! The "problem" we didn't foresee, was that her credit score dropped 88 points after paying off these loans. She has not other open credit (no credit cards, etc.) and neither of us are very versed in Credit Scores.

What I am wondering is, what steps can we take to repair her credit score now that it's taken this hit? Before her student loan accounts were closed she had 100% on-time payments (obviously since she paid them off!) and never had any of the loans go into collections or default, so it's not like she's one who has "earned" her "poor" credit rating. However, due to this 88-point drop her score is not "Poor" edging on "Fair".

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Congratulations on paying off the student loans and being debt free!!! You should actually feel really good about this.

Your wife's issue isn't poor use of credit, it's lack of credit use. While the student loans will continue to be on her report for the next 7 years, she needs something else to continue to show she can use credit wisely. I suggest she find a credit card with a low interest rate, and then use it occasionally. Keep the balance below 20% of the limit. Pay it on time every month. And make sure her income is reported on her credit reports (put it down on the CC application), as income also goes into the equation of credit worthiness. It can take some time to see an upward swing in credit, but doing this should be a good start. Unfortunately it takes using credit to build credit.

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