Can prepaying student loans help credit score?
- This topic has 2 replies, 2 voices, and was last updated 3 years ago by
.
-
Posts
-
I’m looking into buying a car, and would like to raise my credit score so that I can get better terms. I’m able to prepay my student loans, but does it worth it? If I do, will it help my credit score?
Not a bit
The only thing that builds credit is a stream of on-time payments. It takes at least 24 months of timely payment to build a reasonable credit score, and years to build excellent score.
When you prepay student loan (or any other installment loan) you stop making timely payment. While this doesn’t hurt your credit, it doesn’t help it either because it stops building it.
However, keep in mind that credit scores are just a small part of any lending decision. For example, your debt-to-income ratio may have a bigger impact on the potential creditor’s decision. So are your employment stability and many other factors.
If you’re looking for a technique to raise your credit score prior to applying for a car loan (or any other loan for that matter) than read this. The described technique will raise your score immediately while lowering your debt-to-income ratio. This will get you better terms at any lender.
Good luck.
Being responsible to your credit debt is considered a Positive move by banks and lenders. However, the effectiveness of this step depends on where your credit is currently at. You can hope to gain from this by all means.
- You must be logged in to reply to this topic.