Author Topic: Leaving a small balance in student loans - to help credit score?  (Read 3859 times)

xixtrays

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Leaving a small balance in student loans - to help credit score?
« on: November 21, 2012, 06:39:37 AM »
I'm about to pay off my student loans way ahead of schedule.  I wouldn't have to make another payment until the year 2021.  Will it help my credit score if I leave a small balance ($1) to keep the account "active?"

I know that closing a credit card account, rather than leaving it open and not using it, has a negative effect on your credit report.

Thanks for reading,

iamlindoro

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Re: Leaving a small balance in student loans - to help credit score?
« Reply #1 on: November 21, 2012, 09:02:47 AM »
Leaving the balance present isn't what makes it "active," regularly paying off part of the balance does.  Further, student loans are not looked at in the same way-- pay them off completely, it won't harm your credit in the slightest.  You want to keep credit card accounts revolving (charge a small amount every month, pay the entire balance off every time).  This is not so of student loans.

xixtrays

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Re: Leaving a small balance in student loans - to help credit score?
« Reply #2 on: November 21, 2012, 09:58:07 AM »
Exactly what I was looking for.  Thanks, and happy holidays!

simonsez

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Re: Leaving a small balance in student loans - to help credit score?
« Reply #3 on: November 21, 2012, 10:21:29 AM »
You're in a great situation.  The most hassle-free way is to pay them off completely early.  However, if you do want to milk the situation for credit score reasons, you can do that as well.  Like iamlindoro noted, you need to be making regular payments to get credit score clout.  So, if you currently have a really low balance,  the regular payments should also become really low, especially if you'd be essentially dividing the balance by the number of months until 2021.  Thus, your credit report would still show you making regular payments on your loans that are very easy to manage financially.  Realize you'd still be paying a slight amount of interest for this benefit.  So you'd have to calculate the benefit to your credit score vs. the inconvenience of still worrying about them + the interest and see which is the best move.  Call your lender to make sure beforehand that the payment plan you would owe each month would be a small fraction since you are ahead of schedule and NOT the original payment plan amount that would likely zap your loans shortly (in which case, just pay them off and move on).

chucklesmcgee

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Re: Leaving a small balance in student loans - to help credit score?
« Reply #4 on: November 22, 2012, 10:01:14 AM »
Thus, your credit report would still show you making regular payments on your loans that are very easy to manage financially.

This. So while your credit score won't go down if you pay off your loans tomorrow, you're giving up the future opportunity to build more credit history and your score in the future might not be as high as it could have been, as you'll have less payment history.