One loan results in multiple marks on credit report
A single debt, sold and resold, may leave many negative blots
To Her Credit
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also writes regularly for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Stewart Radio and other programs. See her website SallyHerigstad.com
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Dear To Her Credit,
When I was younger, I defaulted on a student loan. I just
agreed to settle the debt. The collector agreed to have it listed as settled in
full or paid in full. I have written confirmation of this and have sent the
However, on my credit report, there are four different
negative listings for the same loan from different organizations. How do I go
about getting them removed from my credit report? -- Marcia
It's highly unusual for someone to be able to settle on a
defaulted student loan. Federal student loans are not negotiable at all, and
even lenders of private student loans have little incentive to negotiate.
That's because student loans are generally not dischargeable in bankruptcy, and
federal laws make it easier for lenders to collect on student loans than on
most other types of debt.
Nevertheless, you say you have succeeded in settling for
less than what you owed, and have sent payment. Now, to limit the damage to your
When you defaulted on your student loan, it was sent first
to one collector and then to another. There's nothing unusual about that. When
Collector A turned over the account to Collector B, Collector A should then have
reported your balance as zero, and so on. If you owed, say, $40,000 in student
loans, your total outstanding on your credit report should never have been more
than $40,000. Now that you have paid it off, your balance on all four accounts
should be zero -- or they should be just as soon as the last collector updates
Mistakes happen, however. Check to make sure each collector
has reported the balance as zero and that no lender or collector is reporting
the same account twice.
If one or more of the collectors is still showing a balance,
you have the right to have it corrected. Follow these steps:
1. Write to the collection agency that is erroneously
showing a balance on the account that has been passed on or that you have paid. CreditCards.com has a sample letter to help you.
2. Write to the credit bureaus and give them the same
information. The credit bureaus must investigate the case within 30 days and
send you their findings. If your credit report changes, they must send you a
The payment history will remain on your credit report for
seven years, on each of the four collection accounts. That's not as bad as you
think. Any prospective lender can see that it's one debt being passed around.
Even if your report shows the same account with the same lender twice -- which
happened to me the last time I applied for a mortgage -- a most cursory glance
by a loan officer should clear things up.
Once you've cleared up any errors, there's only one surefire
remedy for accurately reported negative marks on your credit report, and that's
time. Negative items generally stay on your report for seven years. However, a 1-year-old mark is better than a new one, and a mark from three years ago is
better yet -- especially if followed by a period of no marks at all. The fact
that you have settled and your account balance is zero is in your favor, too.
Here's to a perfectly boring credit report from here on out --
with nothing but positive things for your creditors to report. That's the best way to take care of your credit!
See related: 4 steps to settling privately funded student loans, Settling delinquent debt won't remove it from your credit report
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