How Refinancing My Private Student Loans Affected My Credit Score

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  • I refinanced my student loans to get a lower monthly payment and removed my mom as a co-signer.
  • My credit score improved after the refinance because two of my Navient accounts were still open.
  • My credit score then dropped 12 points a month later when those accounts were closed.

For the last year I have been on a credit repair trip to recover from my past money mistakes.

I have affordable payment plans for my old credit card debt and I have faithfully paid off my student loans. I have also taken the time to call each of my creditors and have my debt transferred from my dead name, the name that transgender and non-binary people are given at birth, to my new name so that I can keep my credit report up to date can stand.

After increasing my score to over 700, I was finally able to refinance my private student loans so I could get a lower monthly payment and remove my mom as a co-signer.

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My credit score unexpectedly went up 40 points

One factor that goes into your credit score is the length of your credit history. Experts say that a long credit history — that is, reputable accounts that have been open for many years and show up on your credit report — can boost your credit score when coupled with making payments on time.

My student loans are the oldest accounts on my Schufa, opened between 2010 and 2014. Refinancing my student loans meant I would close my oldest accounts and shorten my credit history, so I expected my score to drop a few points.

The reason my credit score improved was a happy accident: I refinanced $67,000 in personal student loans, leaving $1,038 in two out of five of my Navient accounts. I didn’t want to leave any debt in my Navient accounts, but I just put $67,000 in the refinance application because it seemed easier. Because my loans were paid off through the refinance and the two old accounts were kept open, my score went up 40 points.

In addition to refinancing my student loans, I also opened a secured credit card with a $200 limit for my phone and internet bills. I pay these off in full every month, and my new on-time payment history coupled with paying off the student loan refinance has greatly improved my credit score.

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The following month, my score dropped 12 points

I knew that credit bureaus would eventually catch up with the changes in my account and that my 753 credit score wouldn’t last long. Shortly after I refinanced my college loans, I received a windfall from a journalism award. I used it to withdraw my remaining $332 in one of the Navent accounts.

Somehow, all four of my closed Navient accounts showed up on my credit report at the same time, and as expected, my credit score dropped 12 points.

Refinancing my student loans improves my credit rating over the long term

I know that once I close my remaining Navient account, my credit score will drop a few points. Luckily I’m concentrating on the long game.

My monthly student loan payments went from $670 per month to $462 per month after refinancing. That monthly savings alone will make it easier for me to pay my student loans and put more on the main balance if I have cash left over at the end of the month. If my credit score improves over the next year due to improved payment history, I plan to refinance again to see if I can get an even lower interest rate.

As I began my credit repair journey, I became emotional about all the twists and turns of my credit. After the first year, I learned to embrace the credit roller coaster ride, with the seatbelt of a long-term strategy to keep me in check.

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