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Lender's goof slams credit scores - MSN Money
A foul-up by student-loan company Sallie Mae has sent thousands of Americans' scores plunging. Here's how to find out if you got hit -- and what to do about it if you did.
By Liz Pulliam Weston
A blunder by student lender Sallie Mae has trashed the credit scores of thousands of unwitting borrowers who signed up for the company's graduated-payment loans.
The loans allow borrowers to make smaller payments, sometimes covering only the interest owed, for a few years before increasing to full payments. But within the past week, Sallie Mae began reporting the loans to credit bureau Equifax as essentially delinquent, sending borrowers' scores plunging.
Elan Glasser of Santa Monica, Calif., received an e-mail alert from his credit monitoring service this week that his Equifax FICO score had dropped 81 points, from 727 to 646. (A score above 720 on the 300-to-850 FICO scale is generally considered good; 620 to 660 is considered mediocre.)
When he investigated, Glasser found nothing significant had changed on his Equifax credit report -- except a notation on his Sallie Mae account of "arrangements made with credit grantor to make partial payments."
'I look like a deadbeat'
Such a notation is typically used for debt settlement arrangements in which the lender is paid less than the full amount owed. As a result, borrowers' Equifax credit reports now show the loans as seriously delinquent, with past-due balances and a recent history of missed payments -- all extremely detrimental to credit scores, which lenders use to gauge creditworthiness.
"Suddenly I look like a deadbeat," said Glasser, a filmmaker. "I'm worried now that my interest rates will go through the roof."
A Sallie Mae official said the coding error was included in a recent download of credit information to Equifax. The other credit bureaus, Experian, TransUnion and Innovis, were not affected, she said.
"Sallie Mae fully understands the importance of one's credit rating, and we sincerely apologize for this error," company spokeswoman Martha Holler wrote in an e-mail Tuesday afternoon. "We are working with great urgency to ensure that the affected credit reports are corrected quickly; in fact, we expect full resolution within the next day. Once the issue is resolved, the payment histories will appear as they would absent our error."
Video: How to get a free credit report
Federal law prohibits creditors from reporting false information to credit bureaus and allows consumers to sue for up to $1,000 for violations. It's unclear, though, whether a goof such as this one qualifies as a violation of the law, particularly if the problem is fixed soon.
Such a serious drop in credit scores can cause havoc on a borrower's finances. Credit card companies may jack up interest rates in response to a plunging score, and insurance companies may increase the premiums they charge. Borrowers may be denied other credit or charged more because of their lower scores.
As the Sallie Mae official noted, the problem seems to affect only Equifax scores. Another borrower, who preferred to remain anonymous, had a 660 Equifax score May 12 but a 782 score at TransUnion and an 820 score at Experian.
Sallie Mae markets the graduated-payment student loans as an option for borrowers who are just starting their careers or who need lower payments because of economic setbacks. Borrowers are allowed to make reduced payments in the initial years of the loan, sometimes paying just interest for up to four years before larger payments kick in.
Working on a solution
News of the blunder began circulating last week on Internet user forums, including CreditBoards.com, and has spread as more borrowers check their scores or are notified by subscription credit monitoring services that their FICO scores have changed.
If you have a graduated payment loan from Sallie Mae, here's how to find out if you're affected and what to do about it:
Obtain a copy of your Equifax credit report, which is available once a year for free from AnnualCreditReport.com. If your Sallie Mae loan account includes a note under the "Descriptions" heading reading, "Arrangements made with credit grantor to make partial payments," your credit has likely been affected -- even if the account shows "paid as agreed" elsewhere on your report.
Take a look at your actual FICO scores, which are typically not available for free. You can buy your Equifax FICO score from Equifax.com or MyFICO.com for $15.95. For comparison purposes, you can buy your FICO scores from Experian and TransUnion, at MyFico.com for $15.95 each (those two bureaus don't sell FICO scores directly to the public).
You can dispute the erroneous description directly with Equifax by using the link provided with your credit report. Make it clear in your dispute that the account is not delinquent and is being paid as agreed.
If you're having a problem with a loan or other credit account because of the Equifax glitch, Sallie Mae has promised to provide help. "We recognize that some customers may need a credit reference during this interim period, and we will gladly and promptly supply one to assist them," Sallie Mae's Holler wrote. "Anyone with questions about their Sallie Mae account may contact us at 1-888-2-SALLIE."
A foul-up by student-loan company Sallie Mae has sent thousands of Americans' scores plunging. Here's how to find out if you got hit -- and what to do about it if you did.
By Liz Pulliam Weston
A blunder by student lender Sallie Mae has trashed the credit scores of thousands of unwitting borrowers who signed up for the company's graduated-payment loans.
The loans allow borrowers to make smaller payments, sometimes covering only the interest owed, for a few years before increasing to full payments. But within the past week, Sallie Mae began reporting the loans to credit bureau Equifax as essentially delinquent, sending borrowers' scores plunging.
Elan Glasser of Santa Monica, Calif., received an e-mail alert from his credit monitoring service this week that his Equifax FICO score had dropped 81 points, from 727 to 646. (A score above 720 on the 300-to-850 FICO scale is generally considered good; 620 to 660 is considered mediocre.)
When he investigated, Glasser found nothing significant had changed on his Equifax credit report -- except a notation on his Sallie Mae account of "arrangements made with credit grantor to make partial payments."
'I look like a deadbeat'
Such a notation is typically used for debt settlement arrangements in which the lender is paid less than the full amount owed. As a result, borrowers' Equifax credit reports now show the loans as seriously delinquent, with past-due balances and a recent history of missed payments -- all extremely detrimental to credit scores, which lenders use to gauge creditworthiness.
"Suddenly I look like a deadbeat," said Glasser, a filmmaker. "I'm worried now that my interest rates will go through the roof."
A Sallie Mae official said the coding error was included in a recent download of credit information to Equifax. The other credit bureaus, Experian, TransUnion and Innovis, were not affected, she said.
"Sallie Mae fully understands the importance of one's credit rating, and we sincerely apologize for this error," company spokeswoman Martha Holler wrote in an e-mail Tuesday afternoon. "We are working with great urgency to ensure that the affected credit reports are corrected quickly; in fact, we expect full resolution within the next day. Once the issue is resolved, the payment histories will appear as they would absent our error."
Video: How to get a free credit report
Federal law prohibits creditors from reporting false information to credit bureaus and allows consumers to sue for up to $1,000 for violations. It's unclear, though, whether a goof such as this one qualifies as a violation of the law, particularly if the problem is fixed soon.
Such a serious drop in credit scores can cause havoc on a borrower's finances. Credit card companies may jack up interest rates in response to a plunging score, and insurance companies may increase the premiums they charge. Borrowers may be denied other credit or charged more because of their lower scores.
As the Sallie Mae official noted, the problem seems to affect only Equifax scores. Another borrower, who preferred to remain anonymous, had a 660 Equifax score May 12 but a 782 score at TransUnion and an 820 score at Experian.
Sallie Mae markets the graduated-payment student loans as an option for borrowers who are just starting their careers or who need lower payments because of economic setbacks. Borrowers are allowed to make reduced payments in the initial years of the loan, sometimes paying just interest for up to four years before larger payments kick in.
Working on a solution
News of the blunder began circulating last week on Internet user forums, including CreditBoards.com, and has spread as more borrowers check their scores or are notified by subscription credit monitoring services that their FICO scores have changed.
If you have a graduated payment loan from Sallie Mae, here's how to find out if you're affected and what to do about it:
Obtain a copy of your Equifax credit report, which is available once a year for free from AnnualCreditReport.com. If your Sallie Mae loan account includes a note under the "Descriptions" heading reading, "Arrangements made with credit grantor to make partial payments," your credit has likely been affected -- even if the account shows "paid as agreed" elsewhere on your report.
Take a look at your actual FICO scores, which are typically not available for free. You can buy your Equifax FICO score from Equifax.com or MyFICO.com for $15.95. For comparison purposes, you can buy your FICO scores from Experian and TransUnion, at MyFico.com for $15.95 each (those two bureaus don't sell FICO scores directly to the public).
You can dispute the erroneous description directly with Equifax by using the link provided with your credit report. Make it clear in your dispute that the account is not delinquent and is being paid as agreed.
If you're having a problem with a loan or other credit account because of the Equifax glitch, Sallie Mae has promised to provide help. "We recognize that some customers may need a credit reference during this interim period, and we will gladly and promptly supply one to assist them," Sallie Mae's Holler wrote. "Anyone with questions about their Sallie Mae account may contact us at 1-888-2-SALLIE."