RE: Rebuilding Credit after Defaulted Student Loan is paid in full - 21 Year old College Student

[Anonymous]

Hello,

I had defaulted on my student loan that my parents and I had taken out my first year of college.  Unfortunately there was a large misunderstanding about the terms and conditions of the loan which ultimately resulted delinquent payments in regards to the interest that was supposed to be paid.  No payments were made and the loan was sent to a collections agency. 

After attempting to refinance the loan ( private loan) and failed, my dad had to bite the bullet and pay it in full to avoid any suit that may be brought against us.  Now my question to the forum is, how does this affect my credit?

A loan that was in collections and now paid in full is still going to linger on my credit report as a defaulted loan, but there is no debt owed so will my credit score increase?  I still have an auto loan out in my name and 2 small lines of credit that are paid every month.  I just want to know what to expect when I send my letter of payment to the credit bureaus.

Any advice and insight is much appreciated.

Thanks,

Shane

[GoodCredBen]

First off, Welcome to the board!

Here are some threads i advise reading - Quite helpful!!

Common Abbreviations

Credit Scoring 101 - great for knowing what is in your credit score and to see how your score is impacted.

What Steps Do I Take - great for learning the repair process.

and Example letters - PFDs, GWs, DVs, etc.

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A collection on your credit report reflects the same whether it is paid or not paid. You only recourse now would be to send GW letters to the collection agency reporting the collection. You will see NO increase from just paying it off.