Does consolidating student loans hurt credit

The reason why the existence of multiple student loans, even those with no negative payment history, can be have a negative impact on your credit scores is due to the fact that scoring models like FICO and Vantage Score consider the number of accounts with balances currently appearing on your credit reports in their scoring processes.

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It also may lower your monthly payments by giving you as long as 30 years to repay.

While consolidating federal student loans may give you a much-needed break on your monthly student loan payments, that lower monthly payment amount comes with a price.

If you’re having a tough time juggling multiple student loan payments, consolidating them may be the way to go. If you have questions about consolidation before you apply, you can contact the Education Department’s Loan Consolidation Information Call Center at 1-800-557-7392.

Consolidating your student loans means combining several loans into a single loan, meaning all those monthly payments get rolled into one. A Direct consolidation loan allows you to consolidate multiple federal education loans into a single loan so you’ll have a single loan payment to make each month, instead of three or four or more.

By increasing your loan repayment period, you’ll have more payments to make and will end up paying more in interest.

There are no prepayment penalties with a Direct consolidation loan, so feel free to pay more when you have the extra cash — it’ll help you save on interest. According to the Education Department, federal loans eligible for a Direct consolidation loan include: Subsidized and unsubsidized Direct loans, subsidized and unsubsidized Stafford loans, Direct PLUS loans, PLUS loans from the Federal Family Education Loan (FFEL) Program, Supplemental Loans for Students (SLS), Perkins loans, Health Education Assistance Loans (HEAL), federal nursing loans and some existing consolidation loans.

Here are two reasons why consolidation might be worth considering.

Using student loans to pay for could cost you a whole lot more.

Of course, as long as your student loan payments are made on time, the actual negative impact which multiple student loan accounts would have on your credit scores is generally going to be minimal.

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