Don't worry if resold student loan clutters up credit report
Dear Opening Credits,
Can one student loan be listed on your credit report by three
different lenders because it was sold from one to the other? Each of the three
owned it at one point in time, but still continue to report it after they have
sold it. Can this item be removed by the agencies that no longer own the debt
or do they have a right to continue to post it? Thanks. -- BC
Dear BC,
Ahh,
student loans. They really do tend to be a bit messy on a credit report. The
reason for this is that original lenders usually put the balance on the sales
block almost as soon as they grant the loan. It's quite a complex business.
Just who has your loans last is somewhat irrelevant to you, the borrower,
though, because as long as they are current, the rates and terms that you
initially agreed on will be unchanged.
Having
a trail of sold and resold student loan debt won't matter to someone looking at
your credit report. If you examine your reports closely, you'll see that when
one lender passed the debt to another, they indicated a zero balance due,
leaving the most recent financial institution with the balance. Any
professional who analyzes your reports -- whether for a line of credit, a job
or a rental apartment -- will be able to see quite plainly that the loan took a
normal migratory route; it didn't multiply with the transactions. Therefore,
while the string of several lenders may be a visual irritant to you, it's not
going to impair you in any way.
Still, I understand that you really
don't like the look of all these old lenders cluttering things up and would like to have them purged
from your reports. Can you? According to Steven Katz, director of consumer brand at TransUnion, the answer is no. As long as the information is accurate, "the item can be reported
simultaneously by more than one lender ... These accounts will remain on the
credit report for a specified period of time, as they were/are part of the
consumer's credit history." He explains
that in keeping with credit reporting standards, lenders that transfer or sell
accounts typically report to the credit reporting companies utilizing a
designated remark code, making it easy for viewers to track the loan's history.
This
is a good point to become familiar with the Fair Credit Reporting Act. Just one
of the reasons this federal law was enacted was to ensure that the information
that is reported on a consumer's credit file is accurate and timely. So when
you look at your reports, ask yourself the following:
- Did this happen? If it did, but the
information is negative, move on to the next question.
- Should it have aged off
the report? There is no limit on how long positive or neutral information can
be reported, but most damaging data (such as late payments or an account that
went into collections) will not be reported after seven years has lapsed.
The
fact that a few banks played pass the potato with your student loan is neither
bad nor good. It happened. Relax and leave it be.
So
now that that worry is dissolved, here's a concern I do think you should have:
keeping those loans current. It's common for people to fret about minor details
while ignoring those that are far more problematic.On a credit report, defaulting on a student loan is among the most major of problems. If you don't
pay when you should, the big "D" will appear on the report and remain until the
loan is cleared. Be acutely aware of your start date, which begins six to nine
months after you graduate, leave school or drop below half-time enrollment. If
you can't pay, go through the deferment or forbearance process to delay
payments for a while. It will help you avoid credit damage as well as
collection calls, tax refund interception, lawsuits and wage
garnishment.
I'm glad you are paying such close
attention to your credit reports, BC. When they reflect excellent borrowing
and repaying activity, you keep your opportunities wide open.
See related: Study: Undergrads relying on credit in record levels, 7 tips for handling your first card,
Building a history without credit cards, Lenders curtail college student loans, Back-to-school advice for parents, students, 10 ways students can build good credit, Credit card forbearance programs offer reprieve from debt
Erica Sandberg's articles and insight are featured in such publications as the Wall Street Journal, Pregnancy, Babytalk, Redbook, Bank Investment Consultant, Prosper.com, MSNMoney.com, and Smartmoney.com. An active television and radio commentator, Erica is the credit and money management expert for San Francisco’s KRON-TV, a frequent guest on Forbes Video Network, Fox Business News, Businessweek-TV, and all Bay Area networks. Prior to launching her own reporting and consulting business, she was affiliated with Consumer Credit Counseling Services of San Francisco where she counseled individuals, conducted educational workshops, and led the media relations department. Erica is a member of the Society of American Business Editors and Writers, and on the advisory committee for Project Money.
Send your question to Erica.
Published: July 22, 2009
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