What to know about your credit as student loan bills restart

D3sign | Moment | Getty Images

On-ramp period should protect your credit

Generally, failing to make timely payments on debts, including your student loans, can damage your credit. Payment history accounts for 35% of your score, according to FICO.

Typically, “missing just one payment can cause your credit score to drop by 50 to 100 points, or more,” said higher education expert Mark Kantrowitz.

More from Personal Finance:
Bipartisan tax deal could boost child tax credit for 2023. What to know
2024 will be ‘a very good year for savers.’ Why you may want to lock in a CD now
How to qualify for Biden’s fast-tracked student loan forgiveness

But before federal student loan bills resumed in October, the Biden administration announced that it would implement a 12-month “on-ramp” to repayment, during which borrowers would be shielded from most of the consequences of late or missed payments.

As a result, throughout this relief period, set to expire Sept. 30, 2024, borrowers who aren’t making payments shouldn’t see negative marks related to their student loans on their credit reports, Kantrowitz said.

The Education Department recently sent a letter to credit reporting and credit scoring companies reminding them that borrowers’ current activity is not necessarily indicative of an inability or unwillingness to make payments.

Nonpayment will likely be reported to the credit reporting agencies as “an authorized forbearance,” Kantrowitz said: “It doesn’t hurt the borrower’s credit, but it doesn’t help, either.”

That doesn’t mean you shouldn’t make payments if you can afford to, said Ted Rossman, senior industry analyst at Bankrate.

“Negative information shouldn’t be reported during the 12-month on-ramp period, but positive information should be included,” Rossman said.

Kantrowitz agreed.

“If a borrower is trying to improve their credit, they should make all of their required payments on time, by the due date,” he said. “Doing this every month consistently eventually leads to a better credit score.”

Still, check for errors on your credit report

Student loan borrowers should regularly check their credit reports to make sure the information is accurate, Kantrowitz said. You can get a free weekly copy of your credit report from each of the three major bureaus — Equifax, Experian and TransUnion — at Annualcreditreport.com.

If your loan servicer makes an error, such as reporting your loan as delinquent during the on-ramp period, you’ll want to bring it to their attention quickly, he said.

Creditors typically have 30 days to investigate your complaint, he said. In this case the creditor would be your student loan servicer, on behalf of the U.S. Department of Education.

President Biden's ambitious new plan to help student loan borrowers, explained

Rossman also recommends filing a complaint with each credit bureau that is showing the wrong information.

“The easiest way to file disputes is on the credit bureaus’ websites,” he said.

Source link

Recommended For You

About the Author: Tony Ramos

Tony Ramos is a seasoned expert in business funding and real estate investment, with a remarkable journey spanning over 20 years. His expertise in flipping properties and implementing the buy-and-hold strategy has positioned him well in the real estate investment sector. Tony's profound understanding of financial strategies extends to teaching individuals and businesses how to become debt-free and leverage the power of LLCs for funding. For insights, mentorship, or collaboration opportunities, Tony can be reached at businessfundingnopg@gmail.com. Connect with him to unlock the potential of smart financial strategies and embark on a path to financial success and freedom.

Leave a Reply

Your email address will not be published. Required fields are marked *