Thursday, September 22, 2011
Incorrect Student Loan Reporting Lowers FICO Scores despite perfect payment history
MOST student loans are in deferment for years while the students go to school. Unfortunately, INTEREST accrues during this time and the balances INCREASE. Because many student loan lenders such as Sallie Mae do NOT report the NEW increased balances, FICO scores are lowered. The scoring formula only sees the ORIGINAL loan amount and the CURRENT balance and subsequently reduces the borrowers’ FICO scores, assuming the accounts are over the limit.
This is very much like the Capital One refusal to report the credit card limits until they finally settled class actions in 2007 and now report the limits. While the the installment balance/limit ratio is not as important as the revolving ratio, it does lower FICO scores.
My client’s letter to Sallie Mae and to the student loan ombudsman and their responses:
Incorrect Student Loan Reporting Lowers FICO Scores
For the umpteenth time I documented that the system is designed to redistribute assets form the working people to the elite and their corporations.
2011 Incorrect student loan credit reporting • (0) Comments • Permalink
