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The Student Loan View from the Credit Reporting Cycle

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The Student Loan View from the Credit Reporting Cycle
The Student Loan View from the
Credit Report Cycle
Presenters
Agenda
The role of credit in personal finance
Credit terms and reporting
Credit reports and scores from the student
loan view
Impact of student loans on reports and scores
Strategies for educating borrowers
Helpful resources
The Role of Credit
in Personal Finance
Credit is an Obligation
• Help students understand their obligations
and options as a borrower
Credit is a contract that
allows for purchases
and services now but
pay later with interest
Good Credit Behavior is Rewarded
• Good credit enables students to:
– Qualify for Grad PLUS, private,
or other consumer loans
– Receive lower interest rates and fees
– Receive lower insurance rates
– Buy a home or rent an apartment
– Secure employment
– Avoid cash deposit requirements
Review of Credit Terms
and Reporting
Credit Reporting Agencies
• Collect and store the
credit records of millions
of individuals
• Provide credit reports to paid
subscribers and consumers
• Work together to develop, maintain,
and enhance an industry-standard
reporting format
Major Credit Reporting Agencies
P.O. Box 740241
Atlanta, GA
745 Anton Blvd.
30348
Costa Mesa, CA
(800) 685-1111
92626
(888) 397-3742
www.equifax.com
www.experian.com
P.O. Box 1000
Chester, PA
19022
(800) 888-4213
250 East Broad St.
Columbus, CA
43215
(800) 540-2505
www.transunion.com
www.innovis.com
Federal Student Loan Reporting
• Servicer must report loan
information to the three
national CRAs within 90 days
of each disbursement
– Reported at the account level,
not loan level
Federal Student Loan Reporting
• HEA strongly encourages servicers to wait
until the borrower is at least 60 days
delinquent to report to the CRAs
• The “clock” for a 30-day
delinquency starts
30 days after the due date
Credit Report
• Credit report summarizes an individual’s
financial history
• Used by creditors to predict risk
Applicant is responsible with personal finances
Applicant is able to handle additional credit
What the Credit Report
Says About a Borrower
• Which types of credit they use
• Whether they pay their bills on time
• How much they owe
• How much credit they have available
Information Found on the
Credit Report
Personal Information
Name, address, birth date, and employer
Account Information
Date opened, credit limit, balance,
monthly payment
Public Record Information
Bankruptcies, judgments, wages garnishments
Information Found on the
Credit Report
Inquiries
Your own, from lenders, from employers
landlords, etc.
Statements of Dispute
Any disputes a person has filed regarding
data found on their credit report
How Long Negative Information
Remains on a Credit Report
Delinquencies
7 years
Bankruptcies
7 years for complete Chapter 13 bankruptcies
10 years for Chapter 7 bankruptcies
Foreclosures
7 years
How Long Negative Information
Remains on a Credit Report
Defaulted Loans
7 years from the date the loan was
30 days delinquent
Collections
7 years, depending on the age of the debt
being collected
Public Records
7 years
Credit Reports from the
Student Loan View
In-School Status
Great Lakes/U.S. Dept of Education
Address:
2401 International Ln
Madison, WI 53704
800-xxx-xxxx
Account Number:
44999111100
Address Identification Number:
111 11111111
Status: Open/In good standing
Date Opened:
09/2009
Account Type:
Installment
Type of Loan:
Education
Date Reported:
09/2010
Term/Duration:
Credit Limit:
$0
Monthly Payment:
Terms Frequency:
Deferred
Highest Credit/Original Loan Amount:
$22,000
Date of Last Payment:
Responsibility:
Individual
Balance:
$22,000
Repayment Status
Great Lakes/U.S. Dept of Education
Address:
2401 International Ln
Madison, WI 53704
800-xxx-xxxx
Account Number:
44999111100
Address Identification Number:
111 11111111
Status: Open/In good standing
Date Opened:
09/2009
Account Type:
Installment
Type of Loan:
Education
Date Reported:
03/2014
Term/Duration:
Credit Limit
$0
Monthly Payment:
$275
Terms Frequency:
Monthly
Highest Credit/Original Loan Amount:
$22,000
Date of Last Payment:
03/2014
Responsibility:
Individual
Balance:
$20,459
Income-Based Repayment Status
Great Lakes/U.S. Dept of Education
Address:
2401 International Ln
Madison, WI 53704
800-xxx-xxxx
Account Number:
44999111100
Address Identification Number:
111 11111111
Status: Open/In good standing
Date Opened:
09/2009
Account Type:
Education
Type of Loan:
Installment
Date Reported:
03/2014
Term/Duration:
Credit Limit:
$0
Monthly Payment:
Terms Frequency:
Monthly
Highest Credit/Original Loan Amount:
$22,000
Date of Last Payment:
03/2014
Responsibility:
Individual
Balance:
$20,459
Delinquent Loan Status
Great Lakes/U.S. Dept of Education
Address:
2401 International Ln
Madison, WI 53704
800-xxx-xxxx
Account Number:
44999111100
Address Identification Number:
111 11111111
Status: Account past due 90 days
Date Opened:
09/2009
Account Type:
Installment
Type of Loan:
Education
Date Reported:
03/2014
Term/Duration:
Credit Limit
$0
Monthly Payment:
$275
Terms Frequency:
Monthly
Highest Credit/Original Loan Amount:
$22,000
Date of Last Payment:
12/2013
Responsibility:
Individual
Balance:
$20,459
Deferment/Forbearance Status
Great Lakes/U.S. Dept of Education
Address:
2401 International Ln
Madison, WI 53704
800-xxx-xxxx
Account Number:
44999111100
Address Identification Number:
111 11111111
Status: Open/Deferred until 10/2014
Date Opened:
09/2009
Account Type:
Installment
Type of Loan:
Education
Date Reported:
03/2014
Term/Duration:
Credit Limit
$0
Monthly Payment:
Terms Frequency:
Deferred
Highest Credit/Original Loan Amount:
$22,000
Date of Last Payment:
9/2013
Responsibility:
Individual
Balance:
$20,459
Paid-in-Full Status
Great Lakes/U.S. Dept of Education
Address:
2401 International Ln
Madison, WI 53704
800-xxx-xxxx
Account Number:
44999111100
Address Identification Number:
111 11111111
Status: Closed/paid/zero balance
Date Opened:
09/2000
Account Type:
Installment
Type of Loan:
Education
Date Reported:
03/2014
Term/Duration:
Credit Limit
$0
Monthly Payment:
Terms Frequency:
Monthly
Highest Credit/Original Loan Amount:
$22,000
Date of Last Payment:
01/2014
Responsibility:
Individual
Balance:
$0
Consolidated Loan Status
Great Lakes/U.S. Dept of Education
Address:
2401 International Ln
Madison, WI 53704
800-xxx-xxxx
Account Number:
44999111100
Address Identification Number:
111 11111111
Status: Closed/transferred
Date Opened:
09/2008
Account Type:
Installment
Type of Loan:
Education
Date Reported:
06/2012
Term/Duration:
Credit Limit
$0
Monthly Payment:
Terms Frequency:
Monthly
Highest Credit/Original Loan Amount:
$22,000
Date of Last Payment:
03/2012
Responsibility:
Individual
Balance:
$20,459
Default Status
Great Lakes/U.S. Dept of Education
Address:
2401 International Ln
Madison, WI 53704
800-xxx-xxxx
Account Number:
44999111100
Address Identification Number:
111 11111111
Status: Claim filed with federal government
Date Opened:
09/2006
Account Type:
Installment
Type of Loan:
Education
Date Reported:
03/2014
Term/Duration:
Credit Limit
$0
Monthly Payment:
$0
Terms Frequency:
Highest Credit/Original Loan Amount:
$22,000
Date of Last Payment:
06/2012
Responsibility:
Individual
Balance:
$0
Rehabilitated Loan
• Loan(s) will no longer be considered to be
in a default status
• The default status reported by loan holder
will be deleted from credit report
• History of delinquencies will remain
on credit report
Old Loan After Rehabilitation
Great Lakes/U.S. Dept of Education
Address:
2401 International Ln
Madison, WI 53704
800-xxx-xxxx
Account Number:
44999111100
Address Identification Number:
111 11111111
Status: Transferred
Date Opened:
1/2007
Account Type:
Installment
Type of Loan:
Education
Date Reported:
03/2014
Term/Duration:
Credit Limit
$0
Monthly Payment:
$424
Terms Frequency:
Monthly
Highest Credit/Original Loan Amount:
$25,640
Date of Last Payment:
03/2014
Responsibility:
Individual
Balance:
$25,459
Old Loan After Rehabilitated
Great Lakes/U.S. Dept of Education
Payment history:
2011
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Status
---- ---- ---- ---- ---- ---- ---- ---- ----
30
60
90
2012
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Status
120
OK
OK
30
60
OK
OK
OK
30
60
90
120
2013
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Status
150
180
210
240
270
300
330
360
---- ---- ---- ----
New Loan After Rehabilitation
Great Lakes/U.S. Dept of Education
Address:
Account Number:
2401 International Ln
5588004444
Madison, WI 53704
800-xxx-xxxx
Address Identification Number:
2222222222
Status: Open/In good standing
Date Opened:
1/2014
Account Type:
Installment
Type of Loan:
Education
Date Reported:
03/2014
Term/Duration:
Credit Limit
$0
Monthly Payment:
$355
Terms Frequency:
Monthly
Highest Credit/Original Loan Amount:
$25,640
Date of Last Payment:
03/2014
Responsibility:
Individual
Balance:
$25,459
Credit Scores from the
Student Loan View
Credit Score
• A number that predicts the likelihood
of repaying debts on time
• Based on a mathematical equation that
evaluates many types of information in the
credit report
• FICO is most commonly used model
Factors That Make up a
Credit Score
Payment History
• Number of days
delinquent
• Time since last
delinquency
• Number of delinquent
accounts
Source: myfico.com
Factors That Make up a
Credit Score
Student Loan Impact
• Late payments could
drop the score by as
much 90-110 points
Source: myfico.com
Factors That Make up a
Credit Score
Amounts Owed
• Total amount owed
compared to original
loan amount on
installment accounts
• Debt-to-credit ratio is
calculated
Source: myfico.com
Factors That Make up a
Credit Score
Student Loan Impact
• Student loan amounts
are included in overall
debt balances
Source: myfico.com
Factors That Make up a
Credit Score
Length of Your Credit
History
• The amount of time
since credit accounts
have been opened
Source: myfico.com
Factors That Make up a
Credit Score
Student Loan Impact
• Staying in good standing
will improve their score
over time
Source: myfico.com
Factors That Make up a
Credit Score
New Credit
• The number and time
since recent inquiries
for new credit
Source: myfico.com
Factors That Make up a
Credit Score
Student Loan Impact
• No impact from Direct
Subsidized and
Unsubsidized applications
• Parent/Grad PLUS
application will count as a
hard inquiry and may lower
the score slightly
Source: myfico.com
Factors That Make up a
Credit Score
Types of Credit Used
• Looks at the mix
of credit types in
your credit file
Source: myfico.com
Factors That Make up a
Credit Score
Student Loan Impact
• Student loans
are a form of
installment credit
Source: myfico.com
Impact of Student Loans on
Credit Reports and Scores
Impact During In-School Period
Loan Application
Direct Sub and Unsub loans
Credit
Report
Credit
Score



(no credit review required)
PLUS loans
(credit review required, will show as an inquiry)
Private loans
(credit review required, will show as an inquiry)
Impact During In-School Period
Disbursement
Federal Student loans
(reported within 90 days)
Private Student Loans
(varies by lender)
Credit
Report
Credit
Score




Impact During
Post-Enrollment Period
Repayment
On-time payments
Delinquent payments
Deferment/Forbearance
Credit
Report
Credit
Score





Strategies for Educating
Borrowers
Encourage Student Loan Borrowers
• Understand their obligations
as a borrower
– Utilize NSLDS to keep
track of the federal
student loans
Encourage Student Loan Borrowers
• Become familiar with
the information in their
credit reports
– Consumers are entitled
to one free credit report
per credit bureau in a
12-month period
– Official site
annualcreditreport.com
Encourage Student Loan Borrowers
• Choose an affordable
payment plan
• Change their plan if the one
they have is not affordable
• Make payments on time
• Set up auto-debit
Encourage Student Loan Borrowers
• Contact the servicer immediately
– Difficulties making a payment
– Change payment due date
– Change payment plans
• Catch up on missed payments if they
become delinquent
Helpful Resources
Resources
• Annualcreditreport.com
or (877) 322-8228
• Myfico.com
• Bankrate.com
• Optoutprescreen.com
Thanks for Attending
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