Couple questions about student loans and credit.

[jesscageorger]

Hello, my name is Jessica, I am 25 now and will be finishing school now..

Couple questions about student loans and credit.

So, do they affect the credit score?

I don't have any job right now, and I am constantly looking, how much time will I have to start paying them off?

I will have around $40,000 total of debt and just want to see how it will affect my credit because I plan on buying a home in the next 3 years.

Do student loans will hurt my credit?

Will I need to hire a  https://raiseupcreditrepair.com/credit-repair-san-antonio.html so I have a score of 700 at least?

Lets say I find a job at 80k, how much should I pay them off?

Not sure what the interest is. 

Anyway, thanks! and I hope I am in the right category!" 

[badger]

I was offered the Sales Manager position at the collection agency I worked for years ago. EWU, CWU, and Gonzaga were my clients. I imagine the laws regarding student loans haven’t changed much, so I can tell you this...

Student Loans fall under a different credit area than credit cards, repos, late payments, etc. They aren’t considered and weighed heavily by potential creditors, as everyone has student loans, and they know the monthly payments are as minimal as possible, and rarely is substantial enough to affect you Debt to Income Ratio, or DTI.

When being considered for a loan, your actual credit score number is of no real consequence. The potential creditor looks at your Debt to Income Ratio, how much money you owe at the time, to how much money you actually make, and base their decision to loan or not loan, almost solely on that.

Your credit score number is just a value banks use to visually gauge how much of a risk you are. That’s all loans are. A mathematical risk equation, where all of your shortcomings and negative marks on your credit report can usually be solved if you agree to give them a reward, interest every month, that they feel is an amount worth taking the chance of loaning to you.

Your credit score number is used to dictate the set interest rate they are willing to give you the loan at. If your credit score is 720+ and you want a home loan, they will set your interest rate between 2.5%-3.75%.  650+ your rate will be 4%-5.5%. 570 is the lowest score they consider, and they will finance you around 6.5%+. Roughly. 

The loan officer chooses the interest rate. They have the sole power to reduce your interest rate before you agree and sign the paperwork. If there is ever a time to negotiate in your life, this is when you need to. And if a loan officer tries to tell you they don’t set the interest rates, tell them you know they don’t, the federal reserve influences  that, but you can reduce the percentage points within the credit score point range guide, set by the federal reserve. 

So don’t worry about your credit score too much right now. You don’t have a job, no one will loan you anything anyway, as you have debt and no income.

When you find a job, don’t worry about how much you should pay. Instead, if you haven’t already, arrange to make minimum payments on all of them. Except the smallest of your student loans (or any of your combined debts) and take the money you were paying over the minimum on all of your loans, and send that “extra” money to the smallest loan, and pay it off as fast as you are able. 

When that debt is gone, continue to make the minimum payments to everyone you owe, like before, and find the next smallest loan. Apply the payment amount you used to pay off the first loan to this next smallest loan, and pay it off, with the minimum payment due, and the same dollar amount payment from the first loan. 

This debt repayment system is effective. You aren’t left scrambling, trying to decide which one to pay, or how much to who, wasting time on a mess of debt chaos. It is a clear, small step to bigger step financial plan that allows you to know who to pay, how much to pay, and if you stick to the simple smallest gets paid off first strategy, you will repay your loans off at an incredible rate, instead of making payments to everyone for the next 10 or 20 years.

Student Loans typically are funded Sallie Mae, federally backed funds, at the lowest rate possible, not based on credit scores. Not only are the loans given with the lowest rates ever, the creditors are flexible. They know they are dealing with unemployed college kids, who hopefully get a great job. But if they don’t, and get a part time job, or move back in with mom and dad, any student can afford $25.00 per month payments, and they even accept $5.00 monthly payments, if you don’t have a job or income for whatever reason.

They know you will repay them, because they know worst case scenario, you will send the $5.00 until it’s repaid. Student loans are given at such a low rate because the government views students that graduate as investment in the infrastructure of the future. Your education will grow and strengthen the enonomy as time goes on, the risk of you not coming up with that $5.00 is minimal, so most people won’t default on their loans, and that reduces the lenders risk from every loan so much, the rates can be and stay low for people becoming productive members of society, and that whole loan sector can give low risk loans, for a long period of time, because there isn’t much risk of not getting paid back.

Also, if you want a credit score of 700+, here’s all you need to do. Get your credit report from freecreditreport.com. Everyone can get this one time per year. Dispute everything on your report. The financial institution that has reported you, has 3 business days to respond. If they don’t, legally, the debt must be removed from the report. People have so many dings here and there, and most of them shouldn’t even be there.

Most important, never pay anyone to “raise” your credit score. The are so many credit counseling agencies that will give you the exact information for free. Do not hire anyone that charges for free information.