My wife has very little credit and about $25,000 in student loans. We have the cash to pay it off, but I wanted to know the best way to build her credit while doing so. Can she boost her credit by keeping at least some of the loan balance and making regular, on-time payments? Will it hurt her that the balance of the loan is a good bit higher than her overall credit limit ~$5,000?
Best way to build credit and pay off student loans? PIGGYBACKING: Despite its' virtually
unlimited potential, piggybacking is
not used by nearly as many consumers as
it should be. It's easy, effective,
and extremely fast. Unfortunately,
it's mostly used among parents and
siblings while those who can really
benefit stay in the dark.
How it works. Almost every credit
card or credit account will allow the
primary account holder to add on (at a
later date) what's known as an
%26quot;Authorized User%26quot; or %26quot;Secondary Account
Holder%26quot;. In most cases, when this is
done, the entire account history
(retroactively) gets posted to the
authorized users credit report
regardless of their current age or
credit history!
For example. If it's a credit card
with a $10,000 limit which has been
paid as agreed for the last 10 years,
then that complete history will be
posted to the authorized users' credit
report. I once saw a clients' credit
report who used this technique with his
mother. He was only 24 at the time and
he had a $15,000 Gold credit card on
his report with history going back 11
years! I laughed as I thought to
myself that this kid would have had to
be approved when he was 13 years old
for this account to be his!
As you can see, this strategy is
usually only used by parents and their
children and in most cases with no
regard to the benefits the children are
reaping credit wise! In fact, in
recent years, due to its'
effectiveness, this technique has led
individuals with excellent credit
scores to %26quot;rent out%26quot; authorized user
accounts on one or even multiple credit
cards in return for a fee! I once
recall seeing an ad in USA TODAY for
just such an opportunity. Like most
good credit loopholes, I'm sure this
methods' days are numbered much like
what may be the case with...
Terry Price is the founder of Consumer
Education Group which publishes the
Credit Secrets Bible (in print since
1994).
For more information on the CREDIT
SECRETS BIBLE you may visit:
http://gaby1221.niesong.hop.clickbank.ne...
Best way to build credit and pay off student loans? The balance of her student loans doesn't exceed her credit limit because the loans are not a open line of credit they are a loan. If she has missed payments in the past, That will ding her credit score.
Building credit is a long and drawn out process. If she locked in her student loan rates when the rates where low then paying off the loan doesn't make sense. If her rates are high, then paying off the loan makes more sense.
There are a lot of factors to a credit score. % of available credit is one of them, that I think you are asking about. This percentage factors the level of revolving credit, it doesn't include car loans, mortgages and thinks like that becuase they're not lines of credit they're term loans.
Best way to build credit and pay off student loans? The interest on student loans is tax deductible. Usually the deduction isn't worth as much as you pay in interest, but if it is, perhaps paying off the loan over time, but at an accelerated pace is best.
Otherwise consider how much money you can earn on on the $25,000. If it is more than you are paying in interest on the loan, keep the loan. Otherwise pay it off and be rid of it.
Paying your bills is an important factor in your credit score. Prepaying your bills should have little effect one way or another.
Your score is based on the percentage of your available credit that you use, the length of time you have had credit relationships, your repayment history and whether you are applying for a lot of new credit.
Your score will increase rapidly if you behave responsibily.
Best way to build credit and pay off student loans? If your wife is trying to build her credit she would not want to completely pay off one of the oldest accounts she has. This would close a line of credit that she has had for years and can actually hurt her credit. The best plan would be what you mentioned in paying off much of the loan but keeping a balance. If she makes her payments on time every month that will definitely help her credit score. She may want to look into consolidation if she has not already done so. That will combine all her loans into one and help her debt to income ratio. That would also give her more options regarding repayment to make sure she never misses one.
you can also visit www.studentaidlending.com for more info
