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 remove my mom as a co-signer.
  • My credit rating went up 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.

Over the past year, I have embarked on a credit repair journey to bounce back from my past money mistakes.

I have affordable payment plans in place for my old credit card debt and am diligently repaying my student loans. I also took the time to call each of my creditors and have my debts transferred from my dead name, the name transgender and non-binary people are given at birth, to my new name so I can hold my up-to-date credit file.

After raising my score above 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 increased by 40 points

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

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

The reason my credit rating went up was due to a happy accident: I refinanced $67,000 in private student loans, leaving $1,038 in two of my five Navient accounts. I didn’t want to leave any debt in my Navient accounts, but just entered $67,000 into the refinance application because it seemed easier. Because my loans were paid off by the refinance and the two old accounts remained 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 bill. I pay them off in full each month, and my new on-time payment history, coupled with paying off the student loan, has boosted my credit rating significantly.

The following month, my score dropped by 12 points

I knew the credit bureaus would eventually catch up with the changes in my account and that my credit score of 753 wouldn’t last long. Shortly after refinancing my student loans, I received a windfall of money from a journalism award. I used this to refund my remaining $332 in one of the Navient accounts.

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

Refinancing my student loans will improve my long-term credit rating

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

My monthly student loan payments went from $670 to $462 per month after refinancing. This monthly savings alone will make it easier for me to pay off my student loans and increase the principal balance if I have money left over at the end of the month. Next year, if my credit rating goes up due to my improving payment history, I plan to refinance again to see if I can get an even lower interest rate.

When I started my credit repair journey, I was moved by all the twists and turns in my credit. After the first year, I learned to accept the roller coaster of credit, with the safety belt of a long-term strategy to control myself.