Currently trying to buy a home
1st year New Hire
Paid off all debt–except for student loans ($40000)
I have been working very hard at imporving my credit since I have obtianed a job in healthcare fresh out of college (’08). I was at 619 and was enrolled in classes this semester. I spoke with my student loan agencies and misunderstood thier circumstances of being able to defer a loan. It ends up you need to be enrolled in two or more classes in order to defer it.
Unfortuantely, I missed 3 months of payment because I thought my loans were in deferment. I corresponded with IDAPP and Ed Financial again and both granted me forbearance. Currently, my score is 542. A representative from the loan agency informed me that as of December I am current, but they have not yet reported it to the credit bureau yet. My next payment will be in 01/15/09, except by this time I will be back in school taking 2 or more classes.
Here are my concerns:
Will my score increase in January?
I have paid off all my delinquent/collection accounts that are reporting as not settled or paid. Will disputing these account increase my credit by January?
Will the deferment help my credit report and credit score?
Will IDAPP/ED FINANCIAL’s report for JANUARY help increase my credit score.
I spoke with a broker who will assist me with an FHA loan only if it my credit score is at 590+.
Hopefully these are government backed student loans and not private student loans. Interestingly, while altering a credit report is considered to be fraud the government engages in this. If you complete their student loan rehabilitation program they will remove the delinquency from your credit report.
Student Loan Credit Correction Process
You may want to consider rehabilitating your defaulted loan(s). Advantages of rehabilitation include:
- Your loan(s) will no longer be considered to be in a default status.
- The default status reported by your loan holder to the national credit bureaus will be deleted.
- You will be eligible for the same benefits that were available on the loans before the loans defaulted. This may include deferment, forbearance, and Title IV eligibility.
- Wage garnishment ends and the Internal Revenue Service no longer withholds your income tax refund.
If you are a Direct Loan Borrower:
To rehabilitate a Direct Loan, you must make at least nine (9) full payments of an agreed amount within twenty (20) days of their monthly due dates over a ten (10) month period to the U.S. Department of Education (Department). Payments secured from you on an involuntary basis, such as through wage garnishment or litigation, cannot be counted toward your nine (9) payments. Once you have made the required payments, your loan(s) will be returned to the Direct Loan Servicing Center.
If you are a FFEL loan borrower:
To rehabilitate a FFEL, you must make at least nine (9) full payments of an agreed amount within twenty (20) days of their monthly due dates over a ten (10) month period to the Department. Payments secured from you on an involuntary basis, such as through wage garnishment or litigation, cannot be counted toward your nine (9) payments. Once you have made the required payments, your loan(s) may be purchased by an eligible lending institution.
If you are a Perkins loan borrower:
To rehabilitate a Perkins Loan, you must make nine (9) on-time, monthly payments of an agreed amount to the Department. Payments secured from you on an involuntary basis, such as through wage garnishment or litigation, cannot be counted toward your nine (9) payments. Once you have made the required payments, your loan(s) will continue to be serviced by the Department until the balance owed is paid in full. Source
But Is That It?
To bring your credit score back up you are going to have to get back in the credit game. If you have some current open credit cards, use them and pay them off each month. We need new good history reported about you. If you closed you cards or don’t have any, get one or two secured cards that will report to the credit bureaus.
Think about it in school terms. If you do not have an open and active cards reporting to the credit bureaus there are no new good grades to bring up you bad GPA. You credit history otherwise ends with loan defaults and that’s not good.
A student loan deferment does nothing to improve your credit report but it is better than being reported in default.
You can dispute all incorrect information on your credit report but make sure you are looking at a consolidated credit report that shows all three credit bureaus on it. Looking at only one credit bureau is like looking at a third of a transcript. They don’t all report the same information. The dispute process can take 60 days from beginning to end.
You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.
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