Want FREE Credit Reports From The Big Three?

[Mark M]

Originally Posted by bowener

Why do we have credit, why cant they just take my ****ing word on it?

Dude ... have you read some of the posts around here? Would you trust some these clowns to tell you the truth about their financial history?

Also, how much do student loans affect your credit, and the credit of a cosigner?

If it helps, $32,000, soon to be ~$39,000 in loans.

Short version:

As long as you make payments on time, you should be fine.

The only issue you may have is when it comes time for the monthly payments. This is because many lenders use "Debt ratio" as one of the ways to determine your payment risk. So if you don't make much money, but have a large monthly payment, that will hurt your chances of getting credit, and/or will make the rates higher.

Long version:

The following is some info from an article I wrote last summer on the new FICO 08 credit scoring model (sorry for the length).

Last year, Fair Issac and Co. (the company that developed the credit scoring models used by Experian, Equifax and TransUnion) tweaked the way your credit score is determined. And while it's still super-duper secret, most folks agree that the following are involved:

But financial experts agree that there are certain things that impact your score (listed in order of importance):

• Payment history
• Amount owed
• Length of credit history
• New credit
• Types of credit

In the old model, each of these factors was weighted differently, with payment history being the most important (around 35 percent of the determination), and the types of new accounts and credit used both considered less important (around 10 percent or so).

There were also other actions that could raise or lower a score that most people never considered. For example, the old formula put an emphasis on "hard inquiries," which occur when a lender looked at your report when you applied for a line of credit. Even if you were not approved for the loan—or turned it down—that hard inquiry could lower your score.

FICO 08 (the new model) is designed to put less emphasis on these hard inquiries, and will also change the impact of other items on your report:

• More emphasis on:
• Having a wider variety of credit accounts (positive)
• Having high balances on your credit cards (negative)
  Less emphasis on:
• Actively using the credit accounts you have (positive)
• Applying for new credit accounts (negative)

Fair Isaac has told reporters and finance experts that most consumers will actually see an increase in their score thanks to the new formula, but some may see a slight drop. The company also states that part of their goal is to more accurately judge who is and who is not a good credit risk, and to treat those with a troubled or short credit history more fairly.

They're also looking to minimize what is called "piggybacking" someone else's score. This is when someone with a good credit score adds someone with a poor score on a credit account (usually a credit card) as an "authorized user." Doing so imports the positive payment history of the account into the credit report of the person with a checkered credit history and, thus, raises that person's credit score.

This loophole came to light in 2007, when credit-repair companies started adding customer's information to the credit accounts of complete strangers with good scores. FICO 08 works around this by ignoring "authorized users" on an account and focusing on the actual account holders, including joint accounts.

The final big change in FICO 08 is that it takes into account modern economic reality: more people use credit more often than in the past. Because of this, actively seeking new lines of credit will not impact a score nearly as much as it used to (the "hard inquiry" issue noted earlier).

So just having a bunch of student loan debt won't kill your score. Missing payments on it, or having a monthly payment that increases your debt ratio, will hurt.

MM
~~