Paula emails: I was delinquent on my federal student loans for a couple of months, but happy to say I'm back on track and auto-paying them each month. Unfortunately, the delinquency was reported and remains on my credit report, I'm told, for 7 to 10 years. But if I consolidate the loans -- and they get paid off and transferred -- do my student loans “move” from the “potentially negative items or items for further review” section on my credit report to “accounts in good standing”? And will the delinquency stop weighing heavily on my credit report especially since I'll be paying the new lender as agreed?
Consolidating can help you to simplify and streamline your payments, but this action, alone, will not erase the negative comments on your credit report. “When a borrower is delinquent on a federal student loan, the delinquency will show up in their credit history and will continue to do so even if the loan is paid off in full. Consolidating a delinquent loan does not remove the delinquency from the credit history,” says Mark Kantrowitz, college aid expert and publisher of Edvisors Network.
Instead, working hard to make on-time payments for a year or two will gradually compensate for the couple of months you fell behind. “Credit scores also consider the age of derogatory information, weighing recent information more heavily than older information,” says Kantrowitz. In other words, the damage from the delinquency diminishes over time with good behavior. Consider automating your student loan payments to ensure you don’t fall behind.
Andrew emails: I have a sizable 403b account accumulated over 15 years. I am likely moving to a new company in the next few months. Both companies' plans have very low expense ratios and so I have no interest in rolling over to an IRA. I have 2 questions: (1) Since the stock market is at an all-time high, does it make sense to transfer my account to the new company? As a firm believer in Buffett's mantra of buying low when everyone else is fleeing, it seems to me that if I transfer now I'd be buying way too high. (2) How much time do I have to decide whether to transfer my 403b into the new company or just leave it with the old company?
When you transfer a retirement account from one employer to another, the state of the stock market shouldn’t really have bearing on the move because you're basically transferring the money over into the same or similar funds.
“It’s about the options the new company versus old offers. If you’re in stock funds now and you’re transferring to stock funds, it’s a wash,” says Julie Murphy Casserly, president of JMC Wealth Management. Instead, evaluate the new 403b’s fees. You say the expense ratios are pretty much the same, so it seems you don’t have to worry about losing money with the new plan.
As far as timing, each company has its own rules about how long you can wait before transferring, if any. Based on the fact that it’s already been 15 years since you’ve touched the account, there may be no window at all. Best to check with the 403(b) plan manager for exact details. Also note that not all employers accept a rollover from a previous employer’s plan, so you need to check with the new company’s plan administrator.
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