Consolidation and Affects on Credit



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Consolidation and Affects on Credit

Daniel Morgan

Updated – Jan 12th 2021

consolidation and affects on credit

Are you thinking about buying your first house or maybe you are seeking to get a loan to start your own business. Truly the list goes on, there are many goals you could have great interest. In Which, your credit report and credit score will end up being the determining factor in your approval or rejection process. Which is one reason we want to discuss consolidation and affects on credit.

Rental rates, insurance rates, automobile loans, home mortgage loans and even job placement all are subject to your credit report and credit score. With good credit, you will have a much better chance loan approvals and lower interest rate offers on many of these financial products with lenders, banks and financial institutions.

However, a low or bad credit score in most cases will result in much higher interest rates which will cause you to pay more for a product than its value. A low or bad credit score can result in bank penalties, cancellation charges, credit card rejections and loan application denials.

The question you and many others may be asking is: Does my student loan affect my credit score? And the answer is YES! your student loans are affecting your credit score in a variety of ways, many of which you may not have been aware of….

So “how does student loans affect your credit score?”

Student loans generally fall into the same category as automobile loans and home mortgage loans.

These kinds of loans are considered as installment loans. An installment loan typically starts with a balance that is paid back over time and has a set number of repayments for that time period.

Does it matter if your student loan is private or federal?

NO, all installment loans are calculated and regarded in the same way on your FICO score, therefore the type of student loan you have does not have an impact on how the loan is evaluated.

Student loans do not have their own their own credit category system.

Is getting more student loans bad for my credit?

Getting more student loans is not ideally bad for your credit score but doing can have a negative impact on your credit report.

Your credit score and your credit report are not always regarded or evaluated the same way.

For example, you may have a 700 credit score, but your credit report may document a number of reported outstanding debts, unpaid balances and a not to impressive payment history.

For Example, Home mortgage lenders and banks evaluate your debt-to-income ratio. This process is used to compare your total monthly debt expenses to your total income.

When this ratio is calculated to be to high, stating that there is too much debt in relation to your income, chances are you will be turned down for your mortgage loan application.

So therefore, ultimately your student loans can affect your credit score, they have a greater impact on affecting your eligibility to take out other loans and establish a good credit report.  

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Your Student Loan Monthly Payments are Important element

So we know that your student loans themselves does impact your credit, but what about the student loan payments?

Probably the most impactful aspect of student loans on your credit is your monthly payments. More specifically, if you are making your payments on time and in full, part or interest only. This is important to understand regarding consolidation and affects on credit.

Changes to your credit score can depend on many factors. Payment history represents 35% of your credit score. This is the most regarded part of your FICO score, by being late on a single payment can cause your credit score to fall.

For example:

Philip currently has a credit score of 670. If Phillip becomes just 30 days delinquent on lets say his student loan payments, his credit score could drop 50 to 90 points from that one account.

Carla, who has a great credit score of 790 could suffer even more than Philip. With a 30 day delinquency Carla’s score would drop by about 100 to 120 points.

Also, if your student loans enter into default or gets sold to a collection agency your credit score as well as your report will suffer an even greater negative impact, often taking your credit score from very good to very bad in an instant. Just another note on Consolidation and Affects on Credit. ‘popmake-{getitnow}’

How student loans can positively affect your credit

Your student loans do not have to be a bruise to your credit, in fact it may be possible for your student loans to become a credit score improvement agent.

Let’s say your credit is not so good, you have paid on your student loans and as a result your credit score has encountered significant drops. You may want to consider refinancing or consolidating your student loans. When you consolidate your student loans a lender can payoff your delinquent student loans and give you a new loan.

The new loan will be somewhat of a new start, providing you a second chance to make your payments on time, build new credit history for your student loans and reduce your income-to-debt ratio, if your payments are eligible to be reduced.

Need your monthly payments reduced?

Fine out if you can get total loan forgiveness!


Key things to take away and remember:

  • Student Loans are installment loans and are report just as other loans for your credit report and credit score.
  • Getting additional student loans has a greater impact on your credit report rather than your credit score.
  • Your student loan payments will make the greatest impact on your credit score. Make your payments on time or seek professional help to help make your payments more affordable
  • Student loan consolidation can help improve your credit if your credit score has already previously been negatively impacted by the student loans.

Now you that you have a better understanding on Consolidation and Affects on Credit. You can decide if consolidation is an option for you. 


31 responses to “Consolidation and Affects on Credit”

  1. i seen this question. so i want to comment with it here. also the answer for all those that need to know like i did.
    How many payments can I get if I consolidate loans with different numbers of qualifying payments?
    As long as your repayment history overlaps for each loan, the consolidation loan will be credited with the largest number of payments of the loans that were consolidated. For example, if you had 50 qualifying payments on one Subsidized Stafford Loan and 100 qualifying payments on another Subsidized Stafford Loan and you consolidate those loans, you will receive 100 qualifying payments on the new Direct Consolidation Loan.

  2. when the department of education changes your servicer like fedloan, navient, the new one MOHELA and all that. its not like other creditors kinda. it wont just automatically affect your credit score

  3. are there more loans than these that get to be refinanced? Federal Family Education Loan (FFEL) Program loans, including subsidized and unsubsidized loans, made to undergraduate and graduate students

    Federal Perkins Loans

    Direct Loan (DL) Program Loans, including subsidized and unsubsidized loans, made to undergraduate and graduate students

  4. Can I get qualifying payment credits for time I spent in default or while I had an in-school deferment?
    No. Only months where a loan was in an “In Repayment” status can receive qualifying payment credit under the limited PSLF waiver. The only exception is loans that were in forbearance during the COVID-19 payment pause period from March 2020 through January 2022, during which borrowers can receive qualifying payment credit if they were employed at a qualifying employer. We recognize that the limited PSLF waiver announcement also mentioned providing automatic credit to borrowers who were in a military or military-related deferment or forbearance. We will work to implement these changes at a later date.

  5. 5 Things to Know About Current Repayment Flexibilities and Your Federal Student Loans Federal loan servicers were directed to report to credit reporting agencies as if regularly scheduled payments were occurring during the payment suspension period. Unless you chose to opt out of the payment suspension, servicers are reporting monthly payments of $0. Delinquency will not be reported during the payment suspension period, even if you chose to opt out of the payment suspension.

  6. my loans have been consolidated for a while, but since covid i have no idea what is going on with them. im sure there are others

  7. When loans are consolidated, any unpaid interest capitalizes. This means your unpaid interest is added to your principal balance. The combined amount will be your new loan’s principal balance.

    You’ll then pay interest on the new, higher principal balance. Depending on how much unpaid interest you have, consolidation can cost you more over the life of your loan.

  8. make sure if you are a student loan borrower to keep up with the Government’s cars act and student loan forbearance program right now. federal student aid and FAFSA are working provisions for people that have lost their jobs due to conornavirus and covid-19 and having trouble making there student loan payments each month. student loan servicers will be made aware. its a good time to try student loan consolidation or student loan forgiveness and student loan forgiveness programs. defaulted student loans are on forbearance right now as well. this year 2020 has been crazy coronavirus and forbearance information for students, borrowers and parents is available. contact GOV student loan service. is a good source for help.

  9. I am extremely nervious about my student loans. with coronavirus and job loss i dont know how im going to handle these student loan payments

  10. my credit report has been doing better since i consolidated my student loans with GOV student loan service. My loan servicer company was not helping at all so i had to do something. Trump isnt trying to do nothing for student loan borrowers.

  11. Consolidation and affects on credit is a huge topic. most ppl have no idea they can get help with this. i see the number for help is 833-782-7133…great

  12. my student loans had killed my credit. i consolidated them with you guys and it was the best thing i could have did. Consolidation and affects on credit is good and more should consider doing it!

  13. so i tried sofi and student loan hero and all those big companies. and it was terrible. Consolidation and Affects on Credit is important, so spoke with these guys a smaller company and the service was much better

  14. i called GOV student loan service and consolidated my student loans today. process was easy my student loan payment is going to drop and the DOE will be paying for everyting

  15. I do agree because my credit was bad for years because i had student loans that went into default. then i got them consolidated with a company like this and they got my loans out of default in like 4 weeks. So consolidation affected my credit in a very positive way. now my credit is growing and i have at 750 right now. Wahoo!

  16. my credit has been shot for a while because of my student loans. i called gov student loan service and now my student loans will help my credit instead of hurting it.

  17. Amazing blog! i have been trying to decide if i want to consolidate my student loans for months now. nervous to take the step forward but thanks to this website i have a more clear understanding of the process. i called as well and spoke with a very knowledgeable expert in your office. Consolidation and Affects on Credit great info. Thanks a lot

  18. hey there and thank you for your info – I have definitely picked up something new from Consolidation and Affects on Credit. i help people with repairing their credit and we dont know much in our field about student loans. but student loans impact credit in such a massive way. thank you and your company for making this info available.

  19. great info…found out that student loans def have an impression on my credit. and now i know where to go to get help with my student loans.

  20. so if i am understanding this correctly, student loan consolidation can actually help my credit. this is great news for me. i will call gov student loan service to get help with this.

  21. I have recently started a blog, the info you offer on this web site has helped me greatly. Thank you for all of your time & work.

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