Refinancing my private student loans lowered my payment by $200 per month, but also lowered my credit score. Here’s why I’m not worried.

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Writer Leo Aquino.

• I refinanced my student loans to get a lower monthly payment and remove my mother as a co-signer.
• My credit score went up after refinancing because two of my Navient accounts were still open.
• My credit score then dropped 12 points a month later when those accounts were closed.

Last year, I was on a credit repair trip to recover from my previous money mistakes.

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

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 mother as a co-signer.

Don't refinance your federal student loans to the tune of. If you transfer your federal student loans to a private lender, you are no longer eligible for President Biden's student loan forgiveness plan worth up to 20.000 USD entitled. You're also no longer eligible for income-driven repayment plans and deferment options if your income suddenly changes.

My credit score unexpectedly increased by 40 points

One factor that goes into your credit score is the length of your credit history. Experts say that a long credit history – d. h. Accounts in good standing that have been open for many years and appear on your credit report – can increase your credit score if coupled with on-time payments.

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

The reason my credit score went up was a happy coincidence: I refinanced 67 worth of private student loans.000 USD, so that 1.038 USD remained in two of five of my Navent accounts. I didn't want to leave any debt in my Navient accounts, but I simply paid 67.Entered thousands of dollars into 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 increased by 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 this off in full each month, and my new on-time payment history combined with paying off the student loan refinance has significantly improved my credit score.

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The following month, my score dropped by 12 points

I knew that credit reporting agencies would eventually catch up with the changes in my account and that my credit score of 753 would not last long. Shortly after I refinanced my student loans, I received a windfall from a journalism award. I used it to pay off my remaining $332 in one of the Navent accounts.

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

Refinancing my student loans will improve my credit score in the long run

I know my credit score will drop a few points once I close my remaining Navient account. Fortunately I am focusing on the long game.

My monthly student loan payments dropped from $670 per month to $462 per month after refinancing. This monthly savings alone will make it easier for me to pay off my student loans and put more toward my principal balance when I have cash left over at the end of the month. If my credit score goes up 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 journey to credit repair, I became emotional about all the twists and turns of my credit. After the first year, I learned to accept the roller coaster ride of credit, with the seat belt of a long-term strategy to keep me in check.