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Will Consolidating Student Loan Debt Hurt My Credit Score?

Written by Equifax Experts on December 23, 2013 in Credit  |   17 comments

When you’re a college senior, you might feel that graduation can’t come fast enough. And while it’s certainly an occasion to celebrate, graduating college also means it’s time to start paying back all those college loans you’ve accumulated. According to a report issued by the…

consolidating student loansWhen you’re a college senior, you might feel that graduation can’t come fast enough. And while it’s certainly an occasion to celebrate, graduating college also means it’s time to start paying back all those college loans you’ve accumulated.

According to a report issued by the nonprofit Institute for College Access and Success, two-thirds of college seniors who graduated in 2011 had loan debt, which averaged $26,600.

While the amount of student loan debt you have can vary depending on the type of college you attended—public or private—and the state in which you attended school, even a manageable amount of student debt can seem overwhelming when it’s spread out over a few loans.

Consolidating your student loans to pay off college debt

The good news is that it’s possible to consolidate all your student loans into a single loan. Consolidating your student loans can lower your monthly payments by giving you longer repayment periods and, in some cases, it can also give you access to alternative repayment plans.

When you merge several loans into one, a single lender pays off your existing debt and then issues you new debt. The new loan generally has a repayment period that is between 12 and 30 years longer than your previous loan, and this longer term results in a lower monthly payment.

In addition, the interest rate on the new loan is fixed at a certain rate, so even if student loan interest rates increase over the term of your loan, your rate will stay the same.

While consolidation has its perks, be aware that the move can also affect your credit score. It’s important to understand how your score will be affected before you make up your mind to consolidate your college loans.

Your credit score could take a small hit—at first. A consolidation triggers a hard inquiry into your credit history that is akin to what happens when you apply for a new credit card or submit a rental application. The inquiry could ding your score by a couple of points, and it can remain on your credit report for two years. But as you continue to make on-time payments on your loans, you can positively impact your score.

Opening new accounts can also can lower your average account age, which could negatively impact your credit score at first. Account age makes up 5 percent to 7 percent of your Equifax credit score.

Each person’s credit history is different, though, so it’s impossible to tell exactly how big an impact a hard inquiry or new account would have on your individual credit score.

A lower monthly payment could make it easier to pay on time. Approximately 35 percent of your Equifax credit score is based on your payment history. This includes on-time payments on credit cards, mortgages, and student loans. If the lower monthly payment makes it easier for you to make your payments on time, it is likely to have a positive impact on your credit score.

Student loans are often seen as good debt. Good debt can be considered as an investment in something that creates value, and it can help you improve your creditworthiness when you continue to make on-time payments.

You will diversify the types of credit you use. Keep in mind that a student loan is an installment loan rather than revolving credit. Having different types of credit can positively impact your score as long as all of the accounts are paid on time. The types of credit used make up 15 percent of your Equifax credit score.

The biggest impact consolidating your student loans can have on your credit score is fairly basic: If you’re unable to make your monthly payments, obtaining a lower payment through a loan consolidation can help. Consistently making on-time payments is the best thing you can do to positively affect your credit score.

Remember that loan consolidation may result in you paying more in interest than you otherwise would have because you will be repaying the loan over a longer period of time.

However, as you move up in your career, you may eventually be able to pay more toward the principal of the loan so that you can reduce the amount of interest you will pay in total. By doing so, you may even be able to repay your loan early.

The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.


  1. Cassandra says:

    Can I consolidate my student loans through equifax and if so how do I go about if?!

  2. Angela. says:

    My credit score tanked 72 points after a student loan consolidation. Don’t do it!

  3. Janice says:

    Like Angela, my very good credit score of 747 dropped to 717. I consolidated 2 loans; both loans were in good standing. There were NO OTHER CHANGES in my credit use.

    For me, this has numerous implications; most related to significantly higher (≥ 1%)interest rates. For example, I need a “new” car sometime in the next 12 months or so. My mortgage lender offered me a lower interest rate IF my credit score was ≥ 720.

    Had I known that my credit rating would drop so much, I never, never would have consolidated…or I would have waited until I’d taken care of the car and mortgage, since they have more stringent qualifying criteria.

  4. Stacy says:

    I just consolidated my loans as well and my credit score took a hit- but not because of the inquiry. My score lowered do to the fact I had taken several “old” loans, and consolidated into one “new”-changing my median credit score to only 3 years!

  5. George says:

    I just consolidated 5 Student Loans into one and my credit took a 20pt drop. Not thinking much about it. Paying on time each month, with each month the score will eventually move back up.

    I personally don’t live by my credit score. I tend to save the money and pay cash.

    • Alexis says:

      I agree with you George. Credit is good only FOR “buy now and pay later.” I save the money and pay cash.

  6. Anonymous says:

    I don’t recommend consolidation if you are trying to rebuild credit. I have done a lot of stuff to increase my credit score. I have gone up about 15 points in a month. Consolidation hit today and I’m down 43 points!!!!!

  7. Colleen S. says:

    OH NO! I wish I had found this before consolidating my loans. My credit score had gone up 40 points in two weeks due to taking out a new loan at my bank. I was excited because I figured the consolidation would be good for my credit score because of the fact that it would pay off the old loans. Every time someone pulled my credit they would say “OH MY GOODNESS LOOK AT THE NUMBER OF LOANS YOU HAVE!” No matter what I said they would say “It does not matter if you have a small payment on each creditors will look at all of those loans and it will look like you have heavy debt”. Now I am seeing people saying that their credit score was KILLED by consolidation. I mean I got everything consolidated and got pay as you earn payments which makes them less than 100 dollars a month instead of looking like 1000 dollars a month. UGH! This is awful! I am scared to look at my score next month!

  8. Kim with all these student loans says:

    So, I want to buy a house within the next two years. I have so much debt with student loans and it shows my debt to income is out of this world. I was told too consolidate all my student loans, and I decided to see if doing this would help my score. But after reading these reviews, Im kinda scared to consolidate. What else can i do to get my loans taking care of for now, until I am able to pay them all? Even if i take a hit on my score after consolidating, with me paying them on time will that help my score over time? Please someone give me answers!!! I just need to hit the stupid lottery 🙁

  9. Kate says:

    You need to decide which is more important.
    1. Taking a temporary, bit hit to your score
    2. Paying less interest over time and being able to manage your debt.

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