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DansDeals Forum => Credit Cards And Finance => Topic started by: zale on February 16, 2012, 12:38:14 AM

Title: Does a Federal (Stafford) loan affect credit in any way?
Post by: zale on February 16, 2012, 12:38:14 AM
I have searched through the forums but found nothing on this subject.

I understand that a Stafford loan is not based in any way, shape or form on credit score, but rather it is based solely on income.

My question is, despite the fact that they will not make a credit inquiry, will it one way or another show up on my credit score? (Or affect it in any way)

If anyone knows the answer to this, it would be most greatly appreciated.
Title: Re: Does a Federal (Stafford) load affect credit in any way?
Post by: aryeh1 on February 16, 2012, 12:43:53 AM
What type of load?
Title: Re: Does a Federal (Stafford) load affect credit in any way?
Post by: HelpMe on February 16, 2012, 12:59:20 AM
They will show on your CR. There is a ton of info on this at creditboardsDOTcom.
Title: Re: Does a Federal (Stafford) loan affect credit in any way?
Post by: AJK on February 16, 2012, 09:41:32 AM
will it one way or another show up on my credit score? (Or affect it in any way)

Yes, but I think you mean "will it show up on my credit report."
Title: Re: Does a Federal (Stafford) loan affect credit in any way?
Post by: Sammy82 on February 16, 2012, 09:56:53 AM
Yes, it will show up. In my case, they are reporting it to all three credit agencies.
Title: Re: Does a Federal (Stafford) loan affect credit in any way?
Post by: BAHayman on February 16, 2012, 10:07:07 AM
Yes, it will show up. In my case, they are reporting it to all three credit agencies.
+1, same for my wife.
Title: Re: Does a Federal (Stafford) loan affect credit in any way?
Post by: michael on February 16, 2012, 11:00:51 AM
It's on my credit report, but I don't know if it affects my score.

I applied for a mortgage recently, and the broker told me that I don't qualify for a loan because I already have lots of loans on my name, and lenders are reluctant to add to the debt load.
Title: Re: Does a Federal (Stafford) loan affect credit in any way?
Post by: zale on February 16, 2012, 11:08:35 AM
Thanks for the replies!

Since I only need a 16k loan, I am debating whether to just pay it out of pocket or to take the Stafford loan.

My main concern was whether this would affect my ability to apply for credit cards. I think the answer here is an obvious YES.
Title: Re: Does a Federal (Stafford) loan affect credit in any way?
Post by: zale on February 16, 2012, 11:09:43 AM
Yes, but I think you mean "will it show up on my credit report."

Correct. What I meant to say was, will it show up on my credit report, and will it affect my credit score. (But I can no longer edit the OP).
Title: Re: Does a Federal (Stafford) loan affect credit in any way?
Post by: josh nyc on February 16, 2012, 11:35:33 AM
It's on my credit report, but I don't know if it affects my score.

I applied for a mortgage recently, and the broker told me that I don't qualify for a loan because I already have lots of loans on my name, and lenders are reluctant to add to the debt load.

the loans do not affect your credit score. However they count as debt payment obligations thereby reducing the mortgage amount a bank will approve (you make 100K but have 10K a year in loan payments the bank will look at you as if you make 90K etc).

A potential way around this is to have loan payment checks sent to the lender that are issued by a 3rd party (parents etc) for 12 months prior and then the lender will sometimes not count the loan payments against your income (reason being that parents are taking on the obligation and that is apparent through the cashed checks). It will not work though if the money is being transferred electronically (i.e. parents making online payments from their account) This is what a mortgage broker told me when I was in a similar situation. I cant guarantee its actually true.
Title: Re: Does a Federal (Stafford) loan affect credit in any way?
Post by: dans fan on February 16, 2012, 01:34:03 PM
the loans do not affect your credit score. However they count as debt payment obligations thereby reducing the mortgage amount a bank will approve (you make 100K but have 10K a year in loan payments the bank will look at you as if you make 90K etc).

why would it not affect your score if your utilization is higher?
A potential way around this is to have loan payment checks sent to the lender that are issued by a 3rd party (parents etc) for 12 months prior and then the lender will sometimes not count the loan payments against your income (reason being that parents are taking on the obligation and that is apparent through the cashed checks). It will not work though if the money is being transferred electronically (i.e. parents making online payments from their account) This is what a mortgage broker told me when I was in a similar situation. I cant guarantee its actually true.
do you have to call lender or it just falls off ? i dont get why on your cr it should stop coming up as an obligation
Title: Re: Does a Federal (Stafford) loan affect credit in any way?
Post by: gozalim on February 16, 2012, 02:03:31 PM
Thanks for the replies!

Since I only need a 16k loan, I am debating whether to just pay it out of pocket or to take the Stafford loan.

My main concern was whether this would affect my ability to apply for credit cards. I think the answer here is an obvious YES.
truth is it may not be a negative against credit card applications. although it raises outstanding debt/utilization, and may make mortgage difficult, it also helps balance out your 'credit type' variety, by including some 'installment credit (better in banks eyes) among all the revolving credit.
Title: Re: Does a Federal (Stafford) loan affect credit in any way?
Post by: HelpMe on February 16, 2012, 02:47:52 PM
There is some speculation here. Everyone needs to be careful. Does it affect your score when it is the deferred stage or just when it is in the repayment stage?
Title: Re: Does a Federal (Stafford) loan affect credit in any way?
Post by: josh nyc on February 16, 2012, 02:54:06 PM
why would it not affect your score if your utilization is higher?do you have to call lender or it just falls off ? i dont get why on your cr it should stop coming up as an obligation

A stafford student loan is not a line of credit. So utilization of what? --- When a bank is determining how much money to lend on a mortgage the two biggest factors for them are: income, and current debt obligations. If you have more debt obligations (loans, credit cards, autos, additional mortgages etc.) then your income (aka your ability to pay) is adjusted accordingly, as you have other debt payments in addition to your mortgage that you will have to pay each month. Whether to approve the loan and the rate is determined based on credit score, but not the actual loan amount.

And as far as my scenario - the broker at that particular bank told me that they would not hold it against me (meaning my income level) if I had cashed 3rd party checks that were paying my student loans (which at the time I did not - I was paying directly from my bank account). Meaning that their bank would be willing to lend me more money if i had 3rd party checks. (assume bank X will lend a person who makes 100K annually with good credit 300K at 4%. But bank X will only lend 250K to the same person if they have 100K in student loans. etc. Bank Y however, is willing to lend 300K provided there are 3rd party checks written. Make sense? These are only ballpark examples)

Of course its on your cr. But a bank can lend you as much or as little money as they feel like. There is no law that a person with income X credit of Y and util of Z gets Loan A etc

I was only discussing stafford loans in terms of getting a mortgage - I was not addressing at all how it affects your score
Title: Re: Does a Federal (Stafford) loan affect credit in any way?
Post by: zale on February 16, 2012, 03:04:28 PM
truth is it may not be a negative against credit card applications. although it raises outstanding debt/utilization, and may make mortgage difficult, it also helps balance out your 'credit type' variety, by including some 'installment credit (better in banks eyes) among all the revolving credit.

Hmm... I've gleaned similar information from a Google search to the tune of enhancing credit score due to "credit variety", but I am still skeptical about that, and here's why:

A couple months ago I leased a car. Since then, I have applied for credit cards from both Citi and Chase, and both gave me a significantly low credit line of 1k (before the lease I was getting around 16-30k credit lines).

Of course it can just be a coincidence, but it sure doesn't feel like it.

Title: Re: Does a Federal (Stafford) loan affect credit in any way?
Post by: AJK on February 16, 2012, 03:31:15 PM
Hmm... I've gleaned similar information from a Google search to the tune of enhancing credit score due to "credit variety", but I am still skeptical about that, and here's why:

A couple months ago I leased a car. Since then, I have applied for credit cards from both Citi and Chase, and both gave me a significantly low credit line of 1k (before the lease I was getting around 16-30k credit lines).

Of course it can just be a coincidence, but it sure doesn't feel like it.

There are many factors involved - type of credit is only 10% (http://www.myfico.com/crediteducation/whatsinyourscore.aspx), whereas, for instance, length of credit history and new credit are 25% combined. So, yes, in the short term you may be penalized a bit for signing up for CC's following a lease, but in the long term, you'll benefit.
Title: Re: Does a Federal (Stafford) loan affect credit in any way?
Post by: michael on February 16, 2012, 04:51:11 PM
There is some speculation here. Everyone needs to be careful. Does it affect your score when it is the deferred stage or just when it is in the repayment stage?

Don't know for certain, but friends at my school told me it really starts to hurt when it goes into repayment, but has negligible effects while in deferment.