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Posted in Student Loans
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meganrhoda

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Will my credit score change after repayment of loans?
I'd like to preface this question with the fact that I'm very young, and I don't know much about financial things at all. I may seem unintelligent, but I've just made some mistakes. Please, don't judge harshly.

In 2011, I took out two student loans and I didn't complete the online program they were taken out for. They almost defaulted, because I thought if I ignored them, they would go away. Yes, I know that's stupid. But still, I honestly believed I owed the full tuition of the school. I thought I was going to have to pay $72,000. I then decided in 2012 to go back to a local community college. They had me take out yet another loan, which I didn't realize I was doing. I thought I was using only financial aid grants. I should probably have read the fine print better. But now ALL of the loans are in deferment, and the two from 2011 are to be paid in January. I have until 2016 for the new one, with a six-month grace period on it as well. So my question here is do I have a chance to fix my credit score by repaying these loans? Will it make any kind of difference? Because I have applied for credit cards and have been denied. And if not, how can I go about getting it taken care of?

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Yes, it will improve.

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If anyone tells you they have never made a financial mistake, or any mistake in their lives, they are a liar!!! We humans are imperfect.  So relax.

Paying the student loans off will definitely improve your credit score.  Student loans are one thing that generally cannot be discharged in bankruptcy (at least not without a lot of hassle to prove financial hardship) and they have no statute of limitations and will remain collectable even after you retire.  If you are still in school or find you are not earning enough to make regular living expenses plus the loan payments, contact the financial aid office. They have the information on other programs and who to contact.

Now, as to the credit card, your youth and short credit history make it difficult/impossible to get a "regular" credit card.  So, go for a secured card.  It will have a lower credit limit, which will raise after a period of good usage and payment.  You'll have to deposit a few hundred dollars in the issuer's bank and that will be your credit limit.  You will also have a higher interest rate but that will not be a problem if you charge no more than 20% of the credit limit and pay it in full every timie the bill comes in.  That will keep you out of credit card trouble.

Hope this helps you.

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