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How many points will your credit score go up when you pay off a defaulted student loan?

Eric Morgan

in Student Loans

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Ronald Miller on February 18, 2018

Initially, your score will be only 5 to 20 points, depending on the student balance of the loan, and whether or not you are transferring it to another lender. If the loan is in of the collection, in reality you can decrease your score by paying it off (see "Pay an Old Collection Lower my FICO Score" - another topic that was discussed earlier in this forum). Of course, with time, your score will improve greatly - especially in comparison to leaving a defaulted student loan on your credit history. But don't expect a tremendous increase just because a defaulted loan is paid. Paying off a loan does not erase the fact that the loan is in default. The history still stands, and will continue to effect your FICO scores until the 7 year statute of limitations has expired (though by that time, the effect on your FICO will be minimum, as it becomes diluted over time). I hope this helps! -Sometimes the 1st initial impact of paying a debt, even a derogatory bad debt is a drop in the credit score. It is strange, however, the payment of a debt essentially closes an account. And account closures could temporarily lower your score, especially payment of the debt, such as student loans. Nobody knows the FICO score formula, by the way, is intended to be a mystery on purpose, or more millions of people could begin to manipulate their score, and in violation of the score of the ability to predict the future. However, the terms of the debt, especially student loans may have a positive effect on your score if you simply continue to pay on TIME instead of paying in full.


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