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05-05-2013 11:44 PM
So one of my PRIVATE STUDENT LOANS defaulted back in 2010. I was still in college, and I was unaware until late 2011 that the loan had defulted.
I am currently paying on this loan through the collections agency, Mercantile Financial. The loan was through Citizens Bank. I thought that this default would stay on my credit report for seven years AFTER it was paid in full, but my recent research has shown otherwise.
My research has shown that "Private student loans follow conventional rules for [reporting] delinquent debt." which is 7.5 years from the FIRST delequency. This is not the case for Federal Student Loans which can be reported forever. That even if you're repaying the defaulted loans monthly, this rule is still in effect and it does not reset every payment that you make. The Statue of Limitations resets every payment, meaning that you can still be sued for the debt and that the debt is still collectible after these 7.5 years, but it is entirely removed from your credit report after 7.5 years.
My goal is to pay back all of my debts, but this was an unfortuante event that happened. I thought that I was going to be in the dumps with my credit for the next 20 years because it may take 10+ years to pay this defaulted loan off, then I thought add another 7 to that. It has been really depressing, and I didn't know what I would do if I need to buy a new car or apply for a line of credit in the future for anything. But this gives me hope! Having these negative reports removed by 2017 is going to be a huge help to me. It really gives me a fighting spirit that I can get back on track, and it makes me want to make doubly certain that i never miss another payment on anything again in my life.
I just have a few questions. Is my research correct, or should I not be happy about this? And am I correct that once this default is removed from my credit report my FICO score will improve? I am current on all my current loans and my credit card. And I have been for more than a year now. If I keep this cycle up, I would think once that default is removed then my score would jump quite a bit. What do you all think, and please, please correct me if I am wrong in my assessment of my situation. I realize that I will have to pay the debt off, but having it removed as a default is just wonderful IMO for the future of my credit!
"Federal law (US Code Title 15, §1681c) controls the behavior of credit reporting agencies (CRAs). The specific law is called the Fair Credit Reporting Act (FCRA). Under FCRA §605 (a) and (b), an account in collection will appear on a consumer’s credit report for up to 7½ years. To determine when an account will be removed by the CRAs (TransUnion, Equifax, and Experian and others), add 7 years to the date of first delinquency."
"In 1997 Congress changed the Fair Credit Reporting Act to limit the number of years that a person could be punished with bad credit notations on a credit report....prior to 1997......collection agencies were re-aging debts every time the debts were passed from collection agency to collection agency...with the end result that a person could technically have bad credit forever for making one financial mistake...this was clearly unfair.
After 1997....negative items can only be reported for up to 7 years (technically 7.5)..starting on the original default date....The time period for starting a new 7 year cycle cannot be reset....even if the debt passes through 1,000 collection agencies....or even if there are later payments made on the debt."
05-06-2013 07:26 AM
05-06-2013 10:17 AM
You know, I'm not sure if they are reporting or not? There's nothing in writing about what I am paying, I just offered to pay them what I was able to pay monthly and they have left me alone.
I haven't pulled my scores because like I said it was so depressing thinking that this was going to be on my report for the next 20+ years. I was given some wrong information about that. I'm generally the type to do my research, but in this case it was something I didn't really want to think about.
Is it possible to ask Mercantile to report these payments if they do not? Are they required to do so in any way?
05-06-2013 01:40 PM
I don't think they're required to do so, but it would certainly help if they were.
Don't worry about your scores, but if it's possible to pull just your reports you might do that. That way, you could see what's being reported and how. Scores are only useful if you're planning a "credit event" (i.e. you're going to app for something); otherwise, all you need to focus on is what's in the reports themselves.