Erica Sandberg is a prominent personal finance authority and author of “Expecting Money: The Essential Financial Plan for New and Growing Families.” She writes “Opening Credits,” a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com.
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
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
Meet CreditCards.com’s reader Q&A experts
Does a personal finance problem have you worried? Monday through Saturday, CreditCards.com’s Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.