topic Re: Education Loans - Open - Charged Off in Rebuilding Your Credit

Education Loans - Open - Charged Off

Anonymous — Mon, 04 Apr 2016 16:00:09 GMT

Without getting into too much detail, I'm currently under an article of agreement to purchase the house I'm living in from the seller after having paid them monthly for 2 years. That contract is coming to a close soon, so I started the mortgage application process.

Lo and behold, I've got some problems, and I'm in kind of a percarious situation.

I thought the statute of limitations for collecting a debt was 7 years. This account (actually, it's broken into 3 accounts... why do they do that?), was opened in 2007. Frankly, I never made one payment. I had to leave school and fend for myself for a job for 2 years before landing a good one. By then, the account was charged off as of September 30, 2010.

After my first mortgage application was denied, I took a look at my credit and was surprised to see these accounts still listed. In fact, on Credit Karma, they're listed as Open - Charged Off (whereas on TransUnion, they're closed - derogatory and the payment history is removed).

So, I went through the online dispute process through Equifax. I disputed that the accounts were still opened and that the latest activity was well over 7 years ago. After a couple weeks, I got a notification that the dispute process was completed. Looked at it and it said they were unable to complete the dispute.

So I had another look at my report. Apparently, the accounts were removed, and then when the creditor reported 3 days later, they were re-added so now it looks like they're new accounts - still open - charged off. My EQ score dropped another 30 points. That doesn't seem right at all!

Should I dispute again?

Have I inadvertently reset the 7-year-clock on these loans?

Re: Education Loans - Open - Charged Off

Anonymous — Mon, 04 Apr 2016 17:09:44 GMT

@Anonymous wrote:
Without getting into too much detail, I'm currently under an article of agreement to purchase the house I'm living in from the seller after having paid them monthly for 2 years. That contract is coming to a close soon, so I started the mortgage application process.

Lo and behold, I've got some problems, and I'm in kind of a percarious situation.

I thought the statute of limitations for collecting a debt was 7 years. This account (actually, it's broken into 3 accounts... why do they do that?), was opened in 2007. Frankly, I never made one payment. I had to leave school and fend for myself for a job for 2 years before landing a good one. By then, the account was charged off as of September 30, 2010.

After my first mortgage application was denied, I took a look at my credit and was surprised to see these accounts still listed. In fact, on Credit Karma, they're listed as Open - Charged Off (whereas on TransUnion, they're closed - derogatory and the payment history is removed).

So, I went through the online dispute process through Equifax. I disputed that the accounts were still opened and that the latest activity was well over 7 years ago. After a couple weeks, I got a notification that the dispute process was completed. Looked at it and it said they were unable to complete the dispute.

So I had another look at my report. Apparently, the accounts were removed, and then when the creditor reported 3 days later, they were re-added so now it looks like they're new accounts - still open - charged off. My EQ score dropped another 30 points. That doesn't seem right at all!

Should I dispute again?

Have I inadvertently reset the 7-year-clock on these loans?

You did not "reset" anything. Department of Education loans do not fall off AT ALL if they remain unpaid.

Re: Education Loans - Open - Charged Off

Anonymous — Mon, 04 Apr 2016 17:21:32 GMT

Thanks very much for your response!

This is a private student loan through Citibank N.A., so I think it'll drop off after SOL (hope?) Up until today, I was confused as to when that actually would be. Apparently, it's after the last account activity (which on my side was never, but I think it's any activity).

What about this nonsense with EQ removing the accounts only to have them come back and nail me for 30 points? Is that worth disputing again? Do I just let it go and eat the 30 points?

I can try to extend my contract with the seller of the house I'm living in for another year, but if I don't have to do that, that would be the best.

Every time I've applied for a mortgage, they see these charged-offs and immediately deny the application. Bother!

Any advice would be hugely appreciated. I'm feeling very overwhelmed.

Re: Education Loans - Open - Charged Off

RobertEG — Mon, 04 Apr 2016 17:32:50 GMT

Norman is correct.

The Higher Education Act, which preempts state law, exempts federally insured or guaranteed student loans from state SOLs and also extends the normal credit report exclusion periods that normally apply to other debts that are set forrth in the FCRA. The FCRA includes a footnote under section 605(a) that clearly references the overriding exclusion periods set within the Higer Education Act. You thus had no 7 year exclusion period.

The fact that the loans may have been charged-off did not affect your continued oblgiation for the debt. That is an internal accounting measure imposed on creditors, and does not relieve consumers of the debt.

Deletion based on a dispute is never final. If the reporting is subsequently verified as accurate or corrected so as to overcome an inaccuracy, then it can be reinserted.

It appears that the prior deletion may have been premature/improper if the debt,upon review, was determined to have the exclusion period as set forth under the Higher Education Act as opposed to the FCRA.

Re: Education Loans - Open - Charged Off

Anonymous — Mon, 04 Apr 2016 17:40:15 GMT

@RobertEG wrote:
Norman is correct.
The Higher Education Act, which preempts state law, exempts federally insured or guaranteed student loans from state SOLs and also extends the normal credit report exclusion periods that normally apply to other debts that are set forrth in the FCRA. The FCRA includes a footnote under section 605(a) that clearly references the overriding exclusion periods set within the Higer Education Act. You thus had no 7 year exclusion period.

The fact that the loans may have been charged-off did not affect your continued oblgiation for the debt. That is an internal accounting measure imposed on creditors, and does not relieve consumers of the debt.

I do not beleive these loans to be federally insured, but just to be 100% sure, how can I check?

These were student loans taken to augment the Federal Plus loans I took out for college. Unfortunately (VERY UNFORTUNATELY) I elected to defer interest until after I graduated (which I never did). With the federal loans, I defered iterest until graduation, so I didn't accrue any. I was able to work with them and get them on repayment or financial forebearance.

With these private loans, the interest wasn't owed until after I graduated, but the interest still piled up while I was in school, greatly increasing the debt. In total, it's around $30,000 all said and done. In 2010, I tried to work with them on a repayment plan and they would not work with me at all, which resulted in the charge-off. I don't remember the exact details anymore, but it was along the lines of "get a loan from a family member and pay this now or else."

I'm grasping at straws here, and please forgive my ignorance and my persistance that these are not federal loans. If they aren't, would they still fall under the Higher Education Act?

Re: Education Loans - Open - Charged Off

RobertEG — Mon, 04 Apr 2016 18:13:07 GMT

If they are not federally insured or guaranteed, then the normal exclusion provisions of the FCRA would apply.

If you are able to get the derogs excluded, that will only remove ability of a prospective lendor to become aware of the unpaid,deliquent debt via a simply pull of your credit report. It will not ensure that they wont otherwise become aware or require its satisfaction prior to any final loan approval.

They can, for example, request a full disclosure of any unpaid, delinquent debt.

You might consult your prospective lendor for any such requiremnts before assuming that credti report exclusion will clear the decks of the unpaid debt.

Is payment of the debt totally off the table?

Re: Education Loans - Open - Charged Off

Anonymous — Mon, 04 Apr 2016 18:25:13 GMT

@RobertEG wrote:
If they are not federally insured or guaranteed, then the normal exclusion provisions of the FCRA would apply.

If you are able to get the derogs excluded, that will only remove ability of a prospective lendor to become aware of the unpaid,deliquent debt via a simply pull of your credit report. It will not ensure that they wont otherwise become aware or require its satisfaction prior to any final loan approval.
They can, for example, request a full disclosure of any unpaid, delinquent debt.
You might consult your prospective lendor for any such requiremnts before assuming that credti report exclusion will clear the decks of the unpaid debt.

Is payment of the debt totally off the table?

I was advised (admittedly, not by a professional) that it would not be beneficial to repay it at this point - that it would only prolong the ordeal. But that was based on the assumption RE: the SOL for collection.

I'm all for making it right, but in all honesty, if I don't have to I can spend the money on other things (like a morgage for my house... or building a college fund for 4 kids....)

As I said, the last time I talked with them, they were not interested in setting up any repayment plans that were reasonable. I don't exactly have $30,000 burning a hole anywhere.

Thanks agian for your advice and your time. I'm very grateful.

Re: Education Loans - Open - Charged Off

Anonymous — Mon, 04 Apr 2016 19:28:24 GMT

@Anonymous wrote:
@RobertEG wrote:
Norman is correct.
The Higher Education Act, which preempts state law, exempts federally insured or guaranteed student loans from state SOLs and also extends the normal credit report exclusion periods that normally apply to other debts that are set forrth in the FCRA. The FCRA includes a footnote under section 605(a) that clearly references the overriding exclusion periods set within the Higer Education Act. You thus had no 7 year exclusion period.

The fact that the loans may have been charged-off did not affect your continued oblgiation for the debt. That is an internal accounting measure imposed on creditors, and does not relieve consumers of the debt.

I do not beleive these loans to be federally insured, but just to be 100% sure, how can I check?

These were student loans taken to augment the Federal Plus loans I took out for college. Unfortunately (VERY UNFORTUNATELY) I elected to defer interest until after I graduated (which I never did). With the federal loans, I defered iterest until graduation, so I didn't accrue any. I was able to work with them and get them on repayment or financial forebearance.

With these private loans, the interest wasn't owed until after I graduated, but the interest still piled up while I was in school, greatly increasing the debt. In total, it's around $30,000 all said and done. In 2010, I tried to work with them on a repayment plan and they would not work with me at all, which resulted in the charge-off. I don't remember the exact details anymore, but it was along the lines of "get a loan from a family member and pay this now or else."

I'm grasping at straws here, and please forgive my ignorance and my persistance that these are not federal loans. If they aren't, would they still fall under the Higher Education Act?

They shouldn't. BUT the exclusion depends on when you first defaulted. Based on the above, I'm assuming that was sometime prior to 2010. Once charged off, a DoFD is determined, and reported to the CRA's within 90 days. If you pull your free reports from annualcreditreport.com, you should see either a DoFD or an estimated removal date. If you believe that reported date to be incorrect, you can dispute that if you have some evidence to the contrary.

Re: Education Loans - Open - Charged Off

Anonymous — Mon, 04 Apr 2016 19:43:09 GMT

I pulled my free report already, and I didn't know to look for that (and I wasn't near a printer or anything to actually print them off, so I can't look now). But assuming that date exists, do I need to do anything else proactively to get those off my report and my score up to snuff?

I really don't have any other baddies left. I had a defaulted fingerhut account that went to collecitons 2 years ago, but it's paid in full. Couple late payments here or there from around the same time period (I think literally 2).

The bank really wants to see a 620 score, and I'm sitting in the 580s. Plus they can't look past the COs.

Really, I think once those COs are gone, I'm in the clear. Everything else I have is in good standing... I hover around 10% CU and no late payemnts since 2012 (above) and I have 4 revolving accounts in good standing.

Re: Education Loans - Open - Charged Off

Anonymous — Mon, 04 Apr 2016 20:18:04 GMT

@Anonymous wrote:
Without getting into too much detail, I'm currently under an article of agreement to purchase the house I'm living in from the seller after having paid them monthly for 2 years. That contract is coming to a close soon, so I started the mortgage application process.

Lo and behold, I've got some problems, and I'm in kind of a percarious situation.

I thought the statute of limitations for collecting a debt was 7 years. This account (actually, it's broken into 3 accounts... why do they do that?), was opened in 2007. Frankly, I never made one payment. I had to leave school and fend for myself for a job for 2 years before landing a good one. By then, the account was charged off as of September 30, 2010.

After my first mortgage application was denied, I took a look at my credit and was surprised to see these accounts still listed. In fact, on Credit Karma, they're listed as Open - Charged Off (whereas on TransUnion, they're closed - derogatory and the payment history is removed).

So, I went through the online dispute process through Equifax. I disputed that the accounts were still opened and that the latest activity was well over 7 years ago. After a couple weeks, I got a notification that the dispute process was completed. Looked at it and it said they were unable to complete the dispute.

So I had another look at my report. Apparently, the accounts were removed, and then when the creditor reported 3 days later, they were re-added so now it looks like they're new accounts - still open - charged off. My EQ score dropped another 30 points. That doesn't seem right at all!

Should I dispute again?

Have I inadvertently reset the 7-year-clock on these loans?

So what about this though? Anything I can do about it or is this my mistake and I have to live with the 30 point hit?

Re: Education Loans - Open - Charged Off

RobertEG — Mon, 04 Apr 2016 20:28:31 GMT

Update reporting on a delinquent account is a form of postive statement that the account remains delinquent, and thus now has increased its period of delinquency.

FICO chooses to consider that fact to have negative scoring affect.

How a credit score is calculated is not itself subjject to dispute under the FCRA, only the accuracy of information that goes into calculation of the score is disputable.

Re: Education Loans - Open - Charged Off

Anonymous — Mon, 04 Apr 2016 21:09:20 GMT

RobertEG wrote:

Update reporting on a delinquent account is a form of postive statement that the account remains delinquent, and thus now has increased its period of delinquency.
FICO chooses to consider that fact to have negative scoring affect.

How a credit score is calculated is not itself subjject to dispute under the FCRA, only the accuracy of information that goes into calculation of the score is disputable.

To be fair, I haven't pulled my FICO score since the dispute. The 30 point hit is indicated on my CK report (FAKO?). Unless you're saying that having submitted the dispute has actually negatively affected my FICO score, in the sense that it allowed CITIBANK to update which somehow more negatively affects my score than it already was due to its deliquency.

I didn't assume my score would get better over time because I never paid it - what I'm saying is that it appears as though this dispute has caused a severe drop in my score below what it already was because of the delinquent accounts. Does that make sense?

Re: Education Loans - Open - Charged Off

Anonymous — Mon, 04 Apr 2016 21:48:21 GMT

@Anonymous wrote:
@RobertEG wrote:

Update reporting on a delinquent account is a form of postive statement that the account remains delinquent, and thus now has increased its period of delinquency.
FICO chooses to consider that fact to have negative scoring affect.

How a credit score is calculated is not itself subjject to dispute under the FCRA, only the accuracy of information that goes into calculation of the score is disputable.
To be fair, I haven't pulled my FICO score since the dispute. The 30 point hit is indicated on my CK report (FAKO?). Unless you're saying that having submitted the dispute has actually negatively affected my FICO score, in the sense that it allowed CITIBANK to update which somehow more negatively affects my score than it already was due to its deliquency.

I didn't assume my score would get better over time because I never paid it - what I'm saying is that it appears as though this dispute has caused a severe drop in my score below what it already was because of the delinquent accounts. Does that make sense?

Yes, that is exactly how it woirks. Items that have not updated in several years WILL cause a score drop if updated.

Re: Education Loans - Open - Charged Off

Anonymous — Mon, 04 Apr 2016 22:54:42 GMT

Ouch. Good to know for the future. Thanks that's very helpful.