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I have a Subsidized Consolidation Student Loan, balance is $6k @ 3.25%.
My monthly payment is $84.
My FICO in April 2010 was 585 and today July 2011 is 700.
I'm hoping to purchase a owner occupied house in the next 1-2 years and ideally to get the best mortgage rate, i believe you need a FICO 740+.
Money wise, I'm fine, I can payoff my student loan and put 20% down on my house and still have emergency. So, my question to you guys is, should I go ahead and payoff my student loan or keep it to build up my credit?
I have 1 mortgage, 1 credit card, Student Loan, and NO car loan.
The interest you pay is tax-deductible, not the amount you pay back. Based on your current balance and interest rate you would get a deduction of less than $200, which MIGHT net you $20 or so at tax time. Not really worth considering.
Normally I say if you can pay something off, do it. But given your overall financial situation and the fact that you want to keep your credit score up to buy a home in the near future, I see no real compelling reason to pay it off early.
I'm assuming that you plan to hold onto the money you have saved and pay it off once you buy the house, so over a year or two you're not talking about paying much interest. A higher credit score will save you much more than that on your mortgage.
The interest you pay is tax-deductible, not the amount you pay back. Based on your current balance and interest rate you would get a deduction of less than $200, which MIGHT net you $20 or so at tax time. Not really worth considering.
Normally I say if you can pay something off, do it. But given your overall financial situation and the fact that you want to keep your credit score up to buy a home in the near future, I see no real compelling reason to pay it off early.
I'm assuming that you plan to hold onto the money you have saved and pay it off once you buy the house, so over a year or two you're not talking about paying much interest. A higher credit score will save you much more than that on your mortgage.
Yes, I plan on holding the money for the student loan.
I'm wondering if paying off my student loan that originated in 2003 help or hurt my FICO score?
I'm wondering if I should apply another credit card, use it, and pay it off.
BTW, I pay off my credit card balance every month, but the balance never goes away because I use it for normal living expenses, lunch, gas, etc.
You might see about a credit line increase on the one you've got first. I think they look more at the available credit you have than how many cards you have.
It would help your FICO by decreasing your debt to credit ratio, one of the largest factors they use. Keep your cc's around 9% of the credit line, tops. More than that, it hurts you. Less than that, and it's hard to establish credit. Pay it off each month.
If you pay it off, your available credit will increase which helps your credit score. Having a current record of regular payments on an installment loan also helps, so paying it off now would be a detriment in that regard.
How about this: If you are pretty sure you'll be getting the mortgage within 2 years, pay off all but about $2000 of you student loan. That will save you some interest and show more available credit, while leaving enough of a balance that you can make the minimum payment for 2 years and keep that payment history current. I don't know that it's what I would do, but if your goal is having the highest credit score possible in a 1-2 year time frame it is probably the best solution.
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