One hundred and fourteen points in a single month — That’s the fastest credit score jump that Nathalie Noisette has seen in working with hundreds of credit-weary clients.
If you’re a student loan borrower looking for a speedy credit recovery, you might be wondering how to raise your credit score by 200 points, and how long that might take. The details will vary from person to person, but below are some simple steps to take, as well as how long you can expect the process to take.
The short and unsatisfying answer is that it depends on your situation.
If you walked into Noisette’s office — she founded consulting company Credit Conversion in 2013 — she would tell you to expect a yearlong recovery.
Jeanne Kelly, another credit coach for hire, agreed, contending that your timeline will vary significantly, depending on whether you’re looking to thicken a bare credit file or improve a poor one.
If you suddenly pay off your maxed-out credit cards and correct errors on your credit report, you might expect a 30- to 60-day turnaround, Kelly said.
On the other hand, if you’re new to the world of credit or have a long history of student loan delinquency, it would take significantly longer, probably closer to Noisette’s estimate.
“I always [say], just like a wound, time heals your credit report,” Kelly said.
Knowing that the road to a 200-point increase might be longer than you hoped, here are five steps to start moving in the right direction:
You might already be familiar with your three-digit credit score, but reviewing your credit report is more critical. A cleaned-up report often leads to a better score.
Kelly recommended accessing your report at least twice a year so that you can correct any mistakes as soon as possible. You can obtain one free copy of your report per year from the three major bureaus — Experian, Equifax and TransUnion — via AnnualCreditReport.com.
To avoid identity theft, consider freezing your report, which will limit who can see or use it without your say-so. Note that you might need to unfreeze it, perhaps at a nominal cost, whenever applying for new credit, such as a refinance of your education debt.
Noisette’s 114-point success story was made possible, in part, by disputing errors on her client’s credit report.
“During an investigation, credit bureaus must validate that the debt is actually a consumer’s debt,” said Noisette, who started her company after improving her once “beyond poor” credit.
It’s possible that your federal loan servicer or private lender misreported your student loan payments or failed to close out an old debt.
“Errors on credit reports happen all the time, identity theft is a real thing and credit bureaus are legally obligated to prove you owe [what] is reported you owe,” she said. “If the burden of proof isn’t met, the negative item affecting your score must come off.”
To remove errors from your report, you’ll need to write a dispute letter and include supporting evidence of the mistake. The Federal Trade Commission provides a template letter to serve as a foundation.
You might find yourself pining for a 200-point increase to your credit score because you fell behind on payments to creditors or lenders in the past. After all, a single late payment has been known to drop a credit score by 80 or more points, according to the National Association of Certified Credit Counselors.
Getting back on track can help you make big strides toward raising your score. That shouldn’t come as a surprise, as payment history accounts for more than a third of your FICO score, the most common credit scoring method.
Once you get up to speed, ensure you stay there. If your most troublesome debt is your outstanding student loans, for example, look into repayment plans that help you more easily afford your monthly dues.
The second biggest lever you can pull to improve your credit involves FICO’s “amounts owed” category — also known as credit utilization — on revolving credit like credit cards.
Even if you can’t zero your balances, you would be better off minimizing them. Noisette’s client, for example, repaid his balances until he hit the 29% mark of each credit card’s total available credit.
“Each trade line you have begins to be affected [adversely] if you use more than 30% of the available credit,” she said. “We choose 29% to stay below the threshold.”
Say you have a $10,000 credit limit on your favorite piece of plastic. If you’ve charged $5,000, you have a 50% utilization. By repaying $2,100 — thereby reducing your usage to $2,900 or 29% — you could improve your score significantly.
Another strategy to nudge your credit utilization in the right direction is to increase your credit limit — just make sure you don’t also increase the amount you owe.
If you have enough cash to pay off a credit card completely, don’t rush to cut it up and close your account. After all, another 15% of your score’s makeup is the length of your credit history. By canceling that card you’ve had since college, you could significantly shorten your average history length.
Similarly, refinancing your student loans could temporarily ding your credit, at least in a minor way, because your new lender effectively pays off your original student loans and replaces them with a single new loan for the same amount. Keep in mind, though, that refinancing could put you in an even better position to improve your score in the future.
Steps 3 and 4 might not have applied to you if you have a short credit history and few accounts. The simple strategy for beginners is to start using a credit card on routine expenses you know you can afford, then repay it all each month to zero out the balance. This can help you avoid interest charges and any dings to your burgeoning credit score.
Although there are ways to build credit without taking on debt, you might also consider taking on another form of credit, such as a credit builder loan, to speed up the process.
Adding an installment loan to your report would address the “new credit” (10%) and “credit mix” (10%) categories of your FICO score. Six to 12 months of prompt payments on a loan for as little as $100 could increase your score from 15 to 100 points, according to the Credit Builders Alliance.
If you already have a student loan in repayment and listed on your credit report, however, borrowing another installment loan is less likely to improve your credit. Your priority should be to keep making full and on-time payments toward your education debt.
A top-notch credit score is a real money-saver. The next time you explore student loan refinancing, a home mortgage or another form of borrowing, you’ll find that an improved score will net you a lower interest rate.
More good news: You have the tools at your disposal to DIY your credit cleanup.
“The strategies to getting your credit improved are pretty straightforward,” Noisette said. “Consumers would benefit from educating themselves about how credit works, then leveraging all they know about credit to improve [and then] maintain their score. Knowledge is power.”
Interested in refinancing student loans?Here are the top 6 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
|1.99% – 6.65%1||Undergrad & Graduate|
|1.99% – 7.10%2||Undergrad & Graduate|
|2.99% – 6.44%3||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|1.99% – 6.43%4||Undergrad & Graduate|
|3.19% – 6.08%5||Undergrad & Graduate|
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1 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. Mortgage lending is not offered in Puerto Rico. All loans are provided by KeyBank National Association.
ANNUAL PERCENTAGE RATE (“APR”)
There are no origination fees or prepayment penalties associated with the loan. Lender may assess a late fee if any part of a payment is not received within 15 days of the payment due date. Any late fee assessed shall not exceed 5% of the late payment or $28, whichever is less. A borrower may be charged $20 for any payment (including a check or an electronic payment) that is returned unpaid due to non-sufficient funds (NSF) or a closed account.
For bachelor’s degrees and higher, up to 100% of outstanding private and federal student loans (minimum $5,000) are eligible for refinancing. If you are refinancing greater than $300,000 in student loan debt, Lender may refinance the loans into 2 or more new loans.
ELIGIBILITY & ELIGIBLE LOANS
Borrower, and Co-signer if applicable, must be a U.S. Citizen or Permanent Resident with a valid I-551 card (which must show a minimum of 10 years between “Resident Since” date and “Card Expires” date or has no expiration date); state that they are of at least borrowing age in the state of residence at the time of application; and meet Lender underwriting criteria (including, for example, employment, debt-to-income, disposable income, and credit history requirements).
Graduates may refinance any unsubsidized or subsidized Federal or private student loan that was used exclusively for qualified higher education expenses (as defined in 26 USC Section 221) at an accredited U.S. undergraduate or graduate school. Any federal loans refinanced with Lender are private loans and do not have the same repayment options that federal loan program offers such as Income Based Repayment or Income Contingent Repayment.
All loans must be in grace or repayment status and cannot be in default. Borrower must have graduated or be enrolled in good standing in the final term preceding graduation from an accredited Title IV U.S. school and must be employed, or have an eligible offer of employment. Parents looking to refinance loans taken out on behalf of a child should refer to https://www.laurelroad.com/refinance-student-loans/refinance-parent-plus-loans/ for applicable terms and conditions.
For Associates Degrees: Only associates degrees earned in one of the following are eligible for refinancing: Cardiovascular Technologist (CVT); Dental Hygiene; Diagnostic Medical Sonography; EMT/Paramedics; Nuclear Technician; Nursing; Occupational Therapy Assistant; Pharmacy Technician; Physical Therapy Assistant; Radiation Therapy; Radiologic/MRI Technologist; Respiratory Therapy; or Surgical Technologist. To refinance an Associates degree, a borrower must also either be currently enrolled and in the final term of an associate degree program at a Title IV eligible school with an offer of employment in the same field in which they will receive an eligible associate degree OR have graduated from a school that is Title IV eligible with an eligible associate and have been employed, for a minimum of 12 months, in the same field of study of the associate degree earned.
The interest rate you are offered will depend on your credit profile, income, and total debt payments as well as your choice of fixed or variable and choice of term. For applicants who are currently medical or dental residents, your rate offer may also vary depending on whether you have secured employment for after residency.
The repayment of any refinanced student loan will commence (1) immediately after disbursement by us, or (2) after any grace or in-school deferment period, existing prior to refinancing and/or consolidation with us, has expired.
POSTPONING OR REDUCING PAYMENTS
After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship.
We may agree under certain circumstances to allow a borrower to make $100/month payments for a period of time immediately after loan disbursement if the borrower is employed full-time as an intern, resident, or similar postgraduate trainee at the time of loan disbursement. These payments may not be enough to cover all of the interest that accrues on the loan. Unpaid accrued interest will be added to your loan and monthly payments of principal and interest will begin when the post-graduate training program ends.
We may agree under certain circumstances to allow postponement (deferral) of monthly payments of principal and interest for a period of time immediately following loan disbursement (not to exceed 6 months after the borrower’s graduation with an eligible degree), if the borrower is an eligible student in the borrower’s final term at the time of loan disbursement or graduated less than 6 months before loan disbursement, and has accepted an offer of (or has already begun) full-time employment.
If Lender agrees (in its sole discretion) to postpone or reduce any monthly payment(s) for a period of time, interest on the loan will continue to accrue for each day principal is owed. Although the borrower might not be required to make payments during such a period, the borrower may continue to make payments during such a period. Making payments, or paying some of the interest, will reduce the total amount that will be required to be paid over the life of the loan. Interest not paid during any period when Lender has agreed to postpone or reduce any monthly payment will be added to the principal balance through capitalization (compounding) at the end of such a period, one month before the borrower is required to resume making regular monthly payments.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of June 23, 2020 and is subject to change.
2 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Splash Financial loans are available through arrangements with lending partners. Your loan application will be submitted to the lending partner and be evaluated at their sole discretion. For loans where a credit union is the lender, or a purchaser of the loan, in order to refinance your loans, you will need to become a credit union member.
The Splash Student Loan Refinance Program is not offered or endorsed by any college or university. Neither Splash Financial nor the lending partner are affiliated with or endorse any college or university listed on this website.
You should review the benefits of your federal student loan; it may offer specific benefits that a private refinance/consolidation loan may not offer. If you work in the public sector, are in the military or taking advantage of a federal department of relief program, such as income based repayment or public service forgiveness, you may not want to refinance, as these benefits do not transfer to private refinance/consolidation loans.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of May 1, 2020.
Fixed APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rate options range from 2.88% (without autopay) to 7.27% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Rates are subject to change without notice. Fixed rate options without an autopay discount consist of a range from 2.88% per year to 6.21% per year for a 5-year term, 3.40% per year to 6.25% per year for a 7-year term, 3.45% to 5.08% for a 8-year term, 3.89% per year to 6.65% per year for a 10-year term, 4.18% per year to 5.11% per year for a 12-year term, 4.20% per year to 7.05% per year for a 15-year term, or 4.51% per year to 7.27% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan).
Variable APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Variable rate options range from 1.99% (with autopay) to 7.10% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Our lowest rate option is shown with a 0.25% autopay discount. Our highest rate option does not include an autopay discount. The variable rates are based on the Variable rate index, is based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of April 27, 2020, the one-month LIBOR rate is 0.43763%. The interest rate on a variable rate loan is comprised of an index and margin added together. The margin is a fixed amount (disclosed at the time of your loan application) added each month to the index to determine the next month’s variable rate. Variable rate options without an autopay discount consist of a range from 2.01% per year to 6.30% per year for a 5-year term, 4.00% per year to 6.35% per year for a 7-year term, 2.09% per year to 3.92% per year for a 8-year term, 4.25% per year to 6.40% per year for a 10-year term, 2.67% per year to 4.56% per year for a 12-year term, 3.44% per year to 6.65% per year for a 15-year term, 4.75% per year to 6.93% per year for a 20-year term, or 5.14% per year to 7.10% for a 25-year term, with no origination fees. APR is subject to increase after consummation. Variable interest rates will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. The maximum variable rate may be between 9.00% and 16.00%, depending on loan term. The floor rate may be between 0.54% and 4.21%, depending on loan term. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
3 Important Disclosures for SoFi.
4 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.19% APR (with Auto Pay) to 6.43% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 6.43% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of June 15, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 6/15/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.2% effective May 10, 2020.