How to check and fix your credit if you've seen it drop since federal student loans went into forbearance
- In accordance with the CARES Act, federal student loans have been automatically put into forbearance, which should not affect borrowers' credit scores.
- However, Politico reports that student loan borrowers whose accounts were put into forbearance noticed their credit scores drop after a reporting error by student loan servicer Great Lakes.
- Great Lakes issued a statement via Twitter that it's working with the three credit reporting bureaus — Equifax, Experian, and TransUnion — to correct the information.
- To avoid damage, student loan borrowers should check their credit scores and dispute any errors they see with the credit bureaus.
Federal student loan borrowers should check their credit reports.
Under the CARES Act, all federal student loans were put into forbearance as of March 13 through September. Automatic monthly payment deductions were stopped, and federal loans stopped accumulating interest.The federally mandated forbearance period shouldn't have affected credit scores. Credit reporting bureau Experian stated on its website, "The Department of Education will report suspended payments to the national credit bureaus as though they were on-time payments."Advertisement
However, Michael Stratford at Politico reports that over 5 million borrowers with federal student loans in forbearance had incorrect information on their credit reports after a reporting error by student loan servicer Great Lakes, one of the 11 companies that manages and services federal student loans.
Great Lakes is responsible for receiving payments and reporting borrowers' payment history to the three main credit reporting bureaus — Equifax, Experian, and TransUnion.Ben Kiser, head of communications at Great Lakes' parent company Nelnet, said that a coding error caused the problem. "Instead of reporting borrowers as current with monthly payments of $0, Great Lakes reported borrowers as current with deferred monthly payments of $0," Kiser wrote in a statement. "That same day, Great Lakes acknowledged the inconsistent coding and let our borrowers know we would adjust the inconsistency in reporting with the credit reporting agencies immediately."
Great Lakes issued the following statement on Twitter, writing, "We do not believe that our reporting has impacted actual consumer credit scores."
—Great Lakes (@MyGreatLakes) May 14, 2020In his statement, Kiser clarified that Great Lakes believes that third-party credit score websites are part of the issue. "We believe the scores at the agencies [Equifax, Experian, and TransUnion] were not impacted," he said. "An updated credit file was provided to the credit reporting agencies on May 15."
What to do if your credit score drops
Get your free credit report and read it carefullyIf you're seeing an impact on your credit score through site other than Experian, Equifax, or TransUnion, it's worth getting a copy of your credit report straight from the source. Advertisement
Federal credit reporting site AnnualCreditReport.com receives information directly from the three credit reporting bureaus. Recently, the website changed its access to credit reports from one free credit report per year from each bureau to one free report per week through April 2021.
Dispute any inaccurate information
If you're still seeing impacts there, Great Lakes suggests contacting each of the three credit reporting bureaus to dispute the mark. This can be done by sending a letter with a request for the correction to each of the three bureaus.
Make a note in your credit file"Any Department of Education-owned student loan that has paused payments ... due to COVID-19 can essentially be forgiven in terms of having a negative impact on the credit report," Beverly Anderson, president of Global Consumer Solutions at Equifax, told Business Insider in April. Advertisement
She said it's possible to make a note of damage directly on your credit report. "You could easily go on to your credit report, and there's a place to insert a statement. You can type 'please be advised that this negative action or negative information on my credit report is related to COVID-19.'"
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