Will Student Loan Consolidation Improve My Bad Credit
A FICO score is a credit score developed by Fair Isaac & Co. Credit scoring is a method of determining the likelihood that credit users will pay their bills. This method was developed in the late 1950s and has become widely accepted by lenders as a reliable credit evaluation.
Credit scores are calculated by using scoring models and mathematical tables that assign points for different pieces of information which best predict your future credit performance. And this information predicts how well of a credit risk you will be in the future.
Consolidating student loans is one of the most effective ways to improve your FICO score dramatically. Just a few additional points on a FICO score can literally save tens of thousands of dollars over a lifetime by locking in low interest rates on houses, cars, and other items.
The second heaviest weighted factor is based on the amount of debt owed; reducing this amount can make a drastic impact on your credit score. Lenders also look at debt to income ratio when determining the amount of credit they will lend you.
Borrowers who refinance their student loans often save well over 50 percent on monthly payments. Young adults who are just leaving school and starting their lives, families and careers already have the chips stacked against them when it comes to finances.
Most graduates rely on credit cards to help leverage cash flow in the years following college. But by choosing credit cards, especially for those who can't pay off the balance immediately, can become a source of angst and take a toll on your FICO score.
Student loan refinancing works by first locking in a low fixed interest rate as opposed to the variable interest rate customary of most government loans. Once a specific repayment amount is determined, the loan is then spread out over a longer period of time.
This change then results in a lower monthly payment. There are no penalties for early repayment of a consolidated student loan, so borrowers can leverage the lower monthly payment to improve their FICO score and pay off high interest debts early on.
The effects of a student loan consolidation and your FICO score should not be overlooked. You will be able to choose a loan that will work for you and know that you are in better control of your debts and your life.
With a better FICO score you can have access to higher limits of credit, loans faster, and rescue the amount of your hard-earned income being spend on interest payments.
