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Member
Chuckiss
Posts: 9
Registered: ‎05-11-2009
0

Student Loan Rehabilitation (Expected credit score increase?)

Any info/advice given will be much appreciated. My wife and I desperately want to purchase a home. I have two more months to pay until I complete my student loan rehabilitation program through the USDE. I am counting the days. On average how much can I expect my credit score to increase upon completing rehabilitation? How soon will these increases take place once I make my last rehabilitation payment? In addition to the default status being deleted on my credit reports will all of the late student loan payments that are on my credit reports be deleted as well once I complete rehabilitation?? It’s my understanding that some credit bureaus count timely payments as 35% of ones credit score. I owe about $65,000 on my student loan. My current credit scores are (TransUnion 642; Equifax 634; Experian 611). My wife’s score is Equifax 754 but I am currently the sole source of income. We have about $70,000 for a down payment and I have a good and stable job. We have been working hard on improving our credit scores for the past year. I’ve come a long ways from my scores in the low 500 range. Patience has been our mantra and now I realize how important staying on top of ones credit is. I should have started a long time ago but lesson learned. Completing rehabilitation is our last hurdle so that we can hopefully someday become homeowners.

 
Frequent Contributor
bigtim
Posts: 359
Registered: ‎06-06-2009
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Re: Student Loan Rehabilitation (Expected credit score increase?)

I can't give you anything specific, but in general terms, once rehab is completed and if the account is reported as PAA, and if it shows a long payment history - going way back to the original loan prior to default like mine did - the score should show a significant impact.

 

It turns out, my past defaulted loan from several years ago went into rehab, and unbeknownst to me at time, after rehab, reported as PAA all the way back to the original date. So what was once my biggest derog on my report, turned out to be my greatest asset in the end.

 

I hope you're pleasantly surprised - hang in there - 2 months is only a lifetime away.... :smileyhappy:

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helplessintn
Posts: 177
Registered: ‎04-10-2008
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Re: Student Loan Rehabilitation (Expected credit score increase?)

I just want to caution you that completing rehab is only part of the process - to get that benefit, a new lender has to pick up the loan.  I'm an example of someone that completed rehab almost a year and a half ago, but no lender is in sight.  :smileysad:  I hope you aren't in Tennessee, because it seems to be different based on where you live... not sure.

 

I hope you aren't in my situation.  But if I were you, I'd educate myself on consolidation as well, just in case, especially if you have a short timeframe for purchasing a home.


Best of luck to you!!!

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Regular Contributor
Istherehope
Posts: 105
Registered: ‎05-26-2009
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Re: Student Loan Rehabilitation (Expected credit score increase?)

I would be curious to hear as well how many (average-or guesstimation :smileyhappy: ) points my fico will go up once I complete the rehab process. I still have 6 months-so quite some time to think further about my STUPID MISTAKES-but am looking forward to my loans being rehabbed and hopefully picked up by another lender. For those that have successfully completed the process-how many points did your fico improve?
Member
Chuckiss
Posts: 9
Registered: ‎05-11-2009
0

Re: Student Loan Rehabilitation (Expected credit score increase?)

Hi Bigtim. Thank you so much for responding. Your reply made my weekend! If everything goes according to plan and completing rehabilitation takes the loan out of default and shows PAA then my updated credit reports will in fact not have any late payments under any tradeline whatsoever. They will be free from any blemishes. I really like how you put it into perspective of how this derog can potentially turn out to be ones greatest asset! Much appreciated.
Member
Chuckiss
Posts: 9
Registered: ‎05-11-2009
0

Re: Student Loan Rehabilitation (Expected credit score increase?)

Hi Helplessintn. I want to thank you also for responding and for the word of caution. I remember reading somewhere that once a student loan has been rehabbed it needs to be picked up by a lender. I've also read somewhere that especially during this economy lenders are not picking up student loans even after they have been rehabilitated. I live in California and my one student loan (at least on all three of my credit reports) states it's under the US Dept of Education. Originally it was under two loans under the US Dept of Ed/FISL/SF. The loan rep I've been talking with has assured me that my loan's default status will be removed once rehabilitation is completed. I'm going to double check though about a lender needing to pick it up and inquire whether all of the late payments will be converted to PAA. I do hope your situation turns around soon and that your loans can reflects what was agreed upon since you did go through the process of completing rehabilitation. Thank goodness for this piece of legislation that allows for this opportunity to even exist. Although it's clear that given your situation something needs to be done.
Member
Chuckiss
Posts: 9
Registered: ‎05-11-2009
0

Re: Student Loan Rehabilitation (Expected credit score increase?)

Hi Istherehope. I will definitely keep you posted on what happens to my situation once I complete my student loan rehabilitation program including whether it was necessary for a lender to pick up my loan, when the default status was removed, whether the late payments were converted to PAA, and hopefully how many points my credit score increased and how soon after. Good luck to you!!!
Regular Contributor
Istherehope
Posts: 105
Registered: ‎05-26-2009
0

Re: Student Loan Rehabilitation (Expected credit score increase?)

Thanks so much. I am not looking to purchase anything for the next two years but want to make sure all my ducks are in a row before then. I am just hoping someone picks up my loan come next march/april!
Member
Chuckiss
Posts: 9
Registered: ‎05-11-2009
0

Re: Student Loan Rehabilitation (Expected credit score increase?)

I copied and pasted below some information on Student Loan Rehabilitation. I guess it all depends on what kind of loan you have and with respect to a federal loan whether whether you are a Direct Loan, FFEL, or Perkins Loan borrower. I'm still trying to learn about this whole process so if I find out any more information I will keep you posted.

 

From this link:

 

http://www.ed.gov/offices/OSFAP/DCS/rehabilitation.html

 

Loan Rehabilitation

 

You may want to consider rehabilitating your defaulted loan(s). Advantages of rehabilitation include:

  • Your loan(s) will no longer be considered to be in a default status.
  • The default status reported by your loan holder to the national credit bureaus will be deleted.
  • You will be eligible for the same benefits that were available on the loans before the loans defaulted. This may include deferment, forbearance, and Title IV eligibility.
  • Wage garnishment ends and the Internal Revenue Service no longer withholds your income tax refund.

 

If you are a Direct Loan Borrower:

To rehabilitate a Direct Loan, you must make at least nine (9) full payments of an agreed amount within twenty (20) days of their monthly due dates over a ten (10) month period to the U.S. Department of Education (Department). Payments secured from you on an involuntary basis, such as through wage garnishment or litigation, cannot be counted toward your nine (9) payments. Once you have made the required payments, your loan(s) will be returned to the Direct Loan Servicing Center.

If you are a FFEL loan borrower:

To rehabilitate a FFEL, you must make at least nine (9) full payments of an agreed amount within twenty (20) days of their monthly due dates over a ten (10) month period to the Department. Payments secured from you on an involuntary basis, such as through wage garnishment or litigation, cannot be counted toward your nine (9) payments. Once you have made the required payments, your loan(s) may be purchased by an eligible lending institution.

If you are a Perkins loan borrower:

To rehabilitate a Perkins Loan, you must make nine (9) on-time, monthly payments of an agreed amount to the Department. Payments secured from you on an involuntary basis, such as through wage garnishment or litigation, cannot be counted toward your nine (9) payments. Once you have made the required payments, your loan(s) will continue to be serviced by the Department until the balance owed is paid in full.

Member
GRAD-With-BADCREDIT
Posts: 9
Registered: ‎05-21-2008
0

Re: Student Loan Rehabilitation (Expected credit score increase?)

Hello, Chuckiss...I am so glad you posted this.  For some reason I have been trying for months when I was going through the process to get an answers from someone about this as well and nothing.  As such, I will let you know about my process:

 

I just completed my rehabilitation on 1 Jul 09.  Yeah!!!  I did it!  I am so proud of myself.  I thought my days of good credit were never to be seen again.  About 90 percent of my problems were from the student loans ($40K).  I digress, I even sent in my 9th payment early to get the process rolling a little faster.  So I thought.  I was just ready to get my credit back in order and eager to do whatever.  About the 5th day of Jul, I contacted US Dept of Ed to see how long it would take to update the credit reports.  I was told this...

 

1.) First, the office (Default resolutions, US Dept of ED) that held the defaulted loan will have to submit to the credit reports first.  After 30 days, I would be able to see their tag removed from the CR and updated. 

 

2.) Second, the loan is then transferred or picked up with the original lender, in this case US Dept of Ed Loan again but the non default office.  It will take about another 30 days to see their tags removed and CR updated.  This all confused me because on my credit reports, each loan just says US Dept of Education...that's it.  I didn't understand the additional tags that people were referring but again...I digress.  Also, I am speaking only on behalf of US Dept of Ed loans (not Sallie Mae or others).  I took my loans out directly from US Dept of Ed

 

3.)  So all in all, it will be between 30 to 60 days before any changes will occur! 

 

I almost wanted to cry.  I was happy to finish the program but I wasn't going to see any changes until September or October.  I need to buy a new car and this was such a downer. 

 

Ok, back to the story.

 

So around 15 Jul...I receive a letter from US Dept of Ed that stated that all information has been submitted to the three major CR agencies to remove the default status from my reports.  And I should receive a follow up letter explaining my new due date and payment arrangements for the new loan. 

 

However, here is the good news...I then get the follow up letter about a week later and it states.  My next payment is not due until Sept.  Therefore, I get a month (Aug) of not paying.  I was so happy!!  I was able to save that money for this month.  So I guess it isn't such a bad deal.

 

So finally, on 1 Aug, I received an email from US Dept of Edu stating congratulations for completing the rehabilitation program and all reports will be updated to show NO defaults!!!  Yeah!!!!  I am to assume this was the final step from the original lender (US Dept of Ed). 

 

I currently have my credit alerts active and have yet to receive any emails in regards to updates to my credit reports.  I am hoping around the end of Aug and first of Sept, things will start to show. 

 

I will surely keep you posted but I hope this helps you in your process.  If you are trying to buy a home, my suggestion would be to wait at least three months after your rehabilitation before your status is updated on your CR. 

 

I wish things would move faster but I got myself into this and I just have to continue to wait it out.  I think it is worth it! 


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