Ask YOUNG MONEY: Can student loans affect my credit score?
Q: Will having student loans (currently deferred) totaling $50,000 - $80,000 negatively affect my credit score or my ability to get a mortgage? Also, I recently got reports from "the big three" credit reporting agencies, which indicated a number of open credit card accounts with zero balances. Would it positively affect my credit score to close those accounts officially?
Lastly, I'm currently disputing some of my negative reports with all 3 agencies. If one agency deletes one or more of my 'bad' accounts from file, do the other two automatically delete it from their files, if the same account has been reported to more than 1 agency? If not, what can I do?
MS: Yes, having an outstanding debt load of up to $80,000 will certainly affect your ability to obtain more debt in the form of a mortgage loan. There are many other factors that will be considered, such as your income, job stability, other debts, payment history, value of the home you are seeking a loan to buy, and more. Closing accounts may or may not positively affect your credit score, depending on your total number of accounts, other debts, etc.
Often, closing unused accounts can improve your score, but you must make sure when you close an account that your credit reports are noted as "accounts closed by client" so that future lenders realize it was your decision and not the creditor's decision to close the accounts. You must make sure each bureau updates your report. They are all independent of each other, and just because one bureau updates does not mean all three will automatically update the information.
About Mike Schiano
Mike Schiano, "The DebtBuster," is author of "Spend Your Way to Wealth." Mike writes the "Ask YOUNG MONEY" column for YOUNG MONEY Magazine and "Ask the DebtBuster" column for MILITARY MONEY Magazine.
Website: http://www.inchargefoundation.com
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