I have had MANY clients whose FICO scores were lowered because their student loans were NOT reported correctly with the CURRENT balance as “high balance.”
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.
Obviously, it’s not good to have accounts with INCREASING balances. However, this is how student loans are designed and the borrowers perform as per the agreements, similar to reverse mortgages or adjustable rate mortgages with negative amortization.
Many of my clients have been paying on their student loans for years and ON TIME, but their FICO scores are lowered.
One of my clients disputed with the credit bureaus, Sallie Mae and the student loan ombudsman.
You can read the moronic response from Ombudsman Office Team Leader Thad Bartkowiak at the page with the Documentation and Summary of Disputes.
This is another classic demonstration of government incompetence — or is it corruption and the DELIBERATE infliction of damages to the people who pay their salaries?
It took me 6 years to get Capital One to finally report the credit limits in 2007. I even lost in court, but my publications got attorneys to file class actions and Capital One finally had to report the credit limits.
Is that what it will take to get student loans reported CORRECTLY?