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Sallie Mae Reporting Error Lowers Equifax Credit Scores

Posted By Jim On 05/15/2008 @ 6:08 am In Credit | 3 Comments

If you have a student loan from Sallie Mae and recently opted for graduated or extended repayment plans, Sallie Mae probably reported your recent loan payment as a partial payment to Equifax and they marked it as delinquent. If all that happened, your Equifax credit score, one of the most important numbers of your adult life, took a big hit as a result of that reporting error (or “glitch,” as they would say) by Sallie Mae. Sallie Mae, based out of Reston, Virginia, happens to be the largest student lender in the United States and this mistake has caused a significant drop in credit scores, as many as a hundred points!

What happened was that Sallie Mae had offered a special payment payment plan (graduated or extended repayment plans) and accidentally reported those payment plans as partial payments to Equifax. Equifax, in seeing only “partial payments,” coded the accounts as delinquent. If you have any student loans, you probably recognize that they’re probably one of the largest debts you have and getting it marked delinquent is bad. Sallie Mae and Equifax discovered this last Friday and the problem was fixed by Tuesday, though approximately 10% of the 10 million Sallie Mae customers were ensnared by this coding snafu and saw their scores decline (according to their spokesperson).

Were you affected? No, unless you did two things. First, do you have a loan with Sallie Mae? If so, did you agree for a “graduated or extended repayment plan?” A graduated or extended repayment plans was an arrangement where you can stretch the typical 10 year payment period over 12 to 30 years, with smaller payments in the beginning.

Does this matter? No, unless you are planning on getting a loan in the next few weeks. I stand corrected, this will matter if an existing loan sees you delinquent on a loan and then jacks up your rates (smells like Universal Default clauses on credit cards), but outside that scenario you’re probably safe. If you don’t plan on borrowing money for a house or a car or anything else for a few weeks, I wouldn’t worry about it because your score will go back to normal once they sort things out.

What to do if your score fell and you need a loan? No problem, you can call up Sallie Mae at (888) 2-SALLIE and request a credit reference letter to indicate that the delinquent account is Sallie Mae’s fault and not your borrowers. You can take that letter to the lender and notify them that your account simply has a problem in it. You won’t need to pull your Equifax report and request a fix or anything, they’re working on it.

This underscores the importance of monitoring your credit history at all times, though they caught this particular error pretty quickly. Some people use myFICO [3] to monitor their credit report (since it monitors your Equifax report, they saw it immediately) but I’m not sure it’s worth $89.95 a year or $8.95 a month. Do I really need my FICO score monitored on a weekly basis? I don’t know. Either way, the service is available or you could just rely on the one a year availability of free credit reports via AnnualCreditReport.com [4].

(Photo by Kato von Kiwi [5])


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[5] Kato von Kiwi: http://www.flickr.com/photos/kato_von_kiwi/712869704/sizes/s/

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