Credit score questions arise as pandemic affects student loans
The CARES law passed by Congress in March effectively postponed federal student loan payments until September in light of the economic crisis caused by the coronavirus pandemic – but some borrowers say their credit scores have taken a hit .
Andrew Dellinger, 29, says he’s been particularly aware of his weekly Credit Karma reports lately. He and his wife plan to buy their first home in Wisconsin in a few months. So he was shocked when he suddenly received an email saying his score at Equifax had dropped 53 points last week.
“There was a remark on my account, and the remark had said that my loans had been postponed,” Dellinger explains. “I’m prepaid until October actually, and I’ve set the auto-pay to pay over and above the minimum amount required, so the irony of this is pretty stark.
Dellinger says the remark about his federal student loans with the Great Lakes service company was the only change to his account.
Then Dellinger did what a lot of people would do in a similar situation: he took the matter to Facebook and found that some of his friends had been through the same thing. Paul Hotaling, 26, of Utica, is more than six months ahead of his student loan payments – but his Equifax and TransUnion scores have dropped by about 20 points, apparently after his April automatic payment was canceled by the CARES law.
“Probably closer to average from what I’ve seen,” Hotaling says. “Like on Twitter, and what people were talking about, it looks like it’s 20-30 [points] is average. But then again, it can rock pretty wild I guess. “
Since then, Hotaling has researched complaints online, but apart from personal accounts on social media and report through local media, information was difficult to come by which made a few days rather confusing. Great Lakes appears to be the only loan service mentioned so far, with some borrowers reporting a declining range of scores, and others seeing no negative changes at all.
When the CARES law was passed in March, Great Lakes informed customers that it was moving accounts – even those with automatic payment – into administrative forbearance until September. Borrowers could contact Great Lakes to opt out of forbearance and continue to make payments if they wished, but Article 3513 of the CARES law explicitly states that the Department of Education and its agents should report suspended payments to credit reporting agencies as if nothing had happened, as if they were regular, scheduled payments.
“So this is clearly a mistake on Great Lakes’ part and the way they are reporting it – what are they going to do to fix it?” Dellinger asks.
Great Lakes did not respond to multiple WAMC calls for comment, and the US Department of Education did not respond in time for the broadcast. In a social media post late last week, Great Lakes denied any wrongdoing, writing: “We are working with credit reporting agencies (Equifax, Experian, TransUnion and Innovis) to secure the accuracy of the information we have reported regarding abstentions from COVID-19, and we do not believe our reports have had an impact on the actual consumer credit scores provided by these agencies. We recommend that you contact credit bureaus directly to get your actual credit score and report, rather than relying on information from third-party services, which often use different formulas.
– Great Lakes (@MyGreatLakes) May 14, 2020
FAFSA recently echoed these sentiments in his own statement, prompting Credit Karma to retort on Twitter: “Credit Karma does not create credit scores or credit reports. Credit reports and ratings are determined by the credit bureaus and credit rating companies.Credit Karma relays the information created by these companies.
Hotaling got another answer: he says that when he called Great Lakes himself, the duty agent seemed to take responsibility.
“They said the way they were going to fix the problem is that the remark is going to stick throughout April, then they’ll fix it for May in the future and retroactively change April.” , explains Hotaling. “But they only fix things at the end of the month, so I guess they expect people to live with that for a month.
Dellinger says he was told the same, allaying fears for the moment despite the wait. But William Riccardi, an assistant professor at the University of Albany School of Business, says it might not be that easy. He says Great Lakes is basically just the messenger – when he can retroactively set the mark on his end, that doesn’t necessarily mean that the credit bureaus will budge.
“It might not be a problem, the credit bureau may update it – or not. And if they don’t update it, then Great Lakes has does whatever they’re supposed to do, “says Riccardi.” And it’s very, very difficult to get in touch with someone at the credit bureaus to explain the situation to a person and say: “Look, this is what happened, the lender fixed it, but it’s still on my credit report.” What do I do? “
Recounting his own experience a few years ago, Riccardi says it took one of the agencies several months to correct an error on their report, even with two separate letters from the lender taking full responsibility for the error. Riccardi speculates that, given the rapid recovery of the CARES Act, the recent discrepancies could be the result of a simple technological error at Great Lakes. But he also notes that the calculations behind our credit scores and the machinations of the credit reporting agencies are seldom transparent, so it is often difficult to determine who is at fault in these situations.
Luckily, Dellinger says he’s in a good financial position right now, and he’s putting his house search on hold until his score is corrected. But it feels bad for people who might be looking for additional funds, especially at this time. The sheer confusion and lack of communication, he says, were the most frustrating.
“I want a practical solution for this, and I want the person responsible for it to own it and say, ‘Hey we’re sorry we did this, this is really unfortunate, let’s fix it,'” said Dellinger. “It’s one simple thing people are asking for here: own it and fix it. ”
After calling Big lakes Again, Dellinger claims the duty officer acknowledged the reporting error and said he would speed up his remediation process in light of his housing plans. In response to online complaints, Great Lakes generally responded, “If you believe our reports are inaccurate or have had a negative impact on your score, please call us at (800) 236-4300. “