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A question asked by many college graduates upon leaving college is does student loan consolidation help credit score? The answer is yes! The fact is, student loan consolidation does more than reduce your long-term debt; it also helps improve your credit score during the course of the loan. In return, this could help the recent graduate get a better home, car, or better rates on personal loans or credit cards after graduation. Student loan consolidation improves your credit score by taking into account the methods that are used by the reporting agencies. For instance, the more open loan accounts you have, the more reports there will be to the credit bureau. And the more open accounts that you have, the lower your credit score will be.

During the course of an academic career, a student will take out as many as 8 loans to help pay for college; one for each semester. Student loan consolidation helps take these 8 accounts and reduce them into one. Therefore, instead of separate accounts with their own interest and terms of payment, you have only one to worry about. That also means less reporting to the creditors, which in return produces a better credit score. Student loan consolidation also creates lower payments in the terms of your student loans. When these agencies determine your credit score, they often look at your minimum monthly payments to determine your score. Chances are that with student loan consolidation, you will have a monthly payment smaller than the lump sum of all the old monthly student payments. If so, you are indeed helping your credit score in the positive way.

Finally, when student loan consolidation helps your credit to debt ratio. When the credit bureau looks at your debt to credit ratio, they will see less in a consolidated loan. When you have more credit available to you, but less used, then you will almost always have a higher credit score. Thus, these three main points should be reason enough for any student to consolidate their student loans into one monthly payment. It not only takes the strain off of paying bills, but it also takes the strain off of bad credit.

This Financial Services article was written by Harold Jones on 8/28/2008