Consolidating student loans is one of the most effective ways to improve your FICO score dramatically. A FICO score is perhaps the most important factor in shaping your financial future. a few additional points on a FICO score can literally save tens of thousands of dollars over a lifetime by locking in low rates of interest on houses, cars, & other items bought with credit.
How FICO scores are determined
A FICO score is derived from a complex algorithm that weighs different aspects of your past & present financial situation in order to foretell how lovely of a credit risk you are likely to be in the future. Each factor is weighted differently depending on importance with 35% of the score based on payment history, 30% based on the amount of debt owed, length of history contributing 10%, new credit 10%, & types of credit 10%.
How student loan consolidation directly improves your FICO score
Because the second heaviest weighted factor (30%) is based on the amount of debt owed, reducing this amount can make a extreme impact on your credit score. Lenders also look at debt to income ratio when determining the amount of credit they will make available. for those who are beginning their careers, the lower every month payments that result from consolidating a student loan can make a highly favorable impact on debt to income ratio.
Borrowers who refinance their student loan often save well over 50% on every month payments. For example, the payment on a $30,000 student loan before refinancing is about $350. After consolidating, the average payment is around $166, a savings of over $2,200 per year.
Indirectly improving your FICO score with student loan refinancing
Young adults who are leaving school & beginning their lives, families, & careers already have the chips stacked against them when it comes to finances. all of people depend on credit cards to help leverage money flow in the years following college. But credit cards, for those who cannot pay off the balance immediately, can become a source of angst & take a toll on your FICO score.
By choosing to redirect the money saved from student loan consolidation, borrowers can pay down high interest credit debts. Using the above example, redirecting $2,200 per year toward paying off high interest credit card debt can add up significantly. The total over 5 years can lead to $11,000 worth of high interest debt repayment.
How student loan refinancing works
Student loan refinancing works by first locking in a low fixed rate of interest as against the variable rate of interest customary of most government loans. Two times a specific repayment amount is determined, the loan is then spread out over an extended timeframe, leading to a lower every month payment. There's no penalties for early repayment of a consolidated student loan, so borrowers can leverage the lower every month payments to improve their FICO score & pay off high interest debts early on.
Benefits of improving your FICO score
The effects of a student loan consolidation on a FICO score ought to not be overlooked. Consolidating student loans is one of the simplest ways to make a massive improvement to your score. The ability to secure credit at low rates of interest will most definitely have an impact on your financial future & the lifestyle you can lead. With a better FICO score you can have access to higher limits of credit, get loans faster, & reduce the amount of your hard-earned income being spent on interest payments.
How FICO scores are determined
A FICO score is derived from a complex algorithm that weighs different aspects of your past & present financial situation in order to foretell how lovely of a credit risk you are likely to be in the future. Each factor is weighted differently depending on importance with 35% of the score based on payment history, 30% based on the amount of debt owed, length of history contributing 10%, new credit 10%, & types of credit 10%.
How student loan consolidation directly improves your FICO score
Because the second heaviest weighted factor (30%) is based on the amount of debt owed, reducing this amount can make a extreme impact on your credit score. Lenders also look at debt to income ratio when determining the amount of credit they will make available. for those who are beginning their careers, the lower every month payments that result from consolidating a student loan can make a highly favorable impact on debt to income ratio.
Borrowers who refinance their student loan often save well over 50% on every month payments. For example, the payment on a $30,000 student loan before refinancing is about $350. After consolidating, the average payment is around $166, a savings of over $2,200 per year.
Indirectly improving your FICO score with student loan refinancing
Young adults who are leaving school & beginning their lives, families, & careers already have the chips stacked against them when it comes to finances. all of people depend on credit cards to help leverage money flow in the years following college. But credit cards, for those who cannot pay off the balance immediately, can become a source of angst & take a toll on your FICO score.
By choosing to redirect the money saved from student loan consolidation, borrowers can pay down high interest credit debts. Using the above example, redirecting $2,200 per year toward paying off high interest credit card debt can add up significantly. The total over 5 years can lead to $11,000 worth of high interest debt repayment.
How student loan refinancing works
Student loan refinancing works by first locking in a low fixed rate of interest as against the variable rate of interest customary of most government loans. Two times a specific repayment amount is determined, the loan is then spread out over an extended timeframe, leading to a lower every month payment. There's no penalties for early repayment of a consolidated student loan, so borrowers can leverage the lower every month payments to improve their FICO score & pay off high interest debts early on.
Benefits of improving your FICO score
The effects of a student loan consolidation on a FICO score ought to not be overlooked. Consolidating student loans is one of the simplest ways to make a massive improvement to your score. The ability to secure credit at low rates of interest will most definitely have an impact on your financial future & the lifestyle you can lead. With a better FICO score you can have access to higher limits of credit, get loans faster, & reduce the amount of your hard-earned income being spent on interest payments.
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