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Credit Score dropped 107 points after Student Loan Rehab, Trying to buy first home!

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Credit Score dropped 107 points after Student Loan Rehab, Trying to buy first home!

Hello! Newbie to this group Smiley Happy

 

 

I have been in Loan Rehabilitation with my US Department of Education Loans since February and finally made my final 9th payment last week. I just received an update from Equifax that my score has dropped from 672 to 565. The notes say .... Updated Account Information US DEPARTMENT OF EDU+Remarks Removed From Account.

The accounts were showing as closed during the rehab process and now show as open. With a late payment of 120 days.

I was told that the rehabilitation process would actually help my credit and help me raise my score once I completed the program.

I am in the process of buying my first home and was waiting for this process to complete so I could get a FHA loan (which I couldn’t until after the program is completed).

The other credit bureaus have not reported the change yet so those scores have not dipped, and I more frightened for my FICO score because I know that is what lenders really look at.

I am so crushed. I thought this would help my score. What is the best course of action?

Thank you!

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4 REPLIES 4
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Valued Contributor

Re: Credit Score dropped 107 points after Student Loan Rehab, Trying to buy first home!


@LondonRose wrote:

Hello! Newbie to this group Smiley Happy

 

 

I have been in Loan Rehabilitation with my US Department of Education Loans since February and finally made my final 9th payment last week. I just received an update from Equifax that my score has dropped from 672 to 565. The notes say .... Updated Account Information US DEPARTMENT OF EDU+Remarks Removed From Account.

The accounts were showing as closed during the rehab process and now show as open. With a late payment of 120 days.

I was told that the rehabilitation process would actually help my credit and help me raise my score once I completed the program.

I am in the process of buying my first home and was waiting for this process to complete so I could get a FHA loan (which I couldn’t until after the program is completed).

The other credit bureaus have not reported the change yet so those scores have not dipped, and I more frightened for my FICO score because I know that is what lenders really look at.

I am so crushed. I thought this would help my score. What is the best course of action?

Thank you!


Was this EQ score your mortgage score or a vantage score or your FICO 8 score?

 

If it is your Vantage score they are wildly volatile and any changes from a closed account to open account will change the score greatly. Do you have a thin file? If so, even more. Regardless, I would ignore any Vantage score changes and do not get worked up if those change for the worst.

 

There was no guaruntee that the lates woupd be removed after completion of rehab, only that the CAs would be removed and defult status removed.

 

I know mine had a remark "affected by natural disaster" which excluded them from my scores. Not sure if this what happened to you, but having that remark removed would probably dip the score.

 

If you made the payment just last week, it sometimes takes a bit for all the changes to update: such as old CAs be removed and "new" old tradlines be opened or reopened.

 

I would be patient, the process isn't fast and don't dispute anything as that will likely just make it worse.

 

It is true you cannot have defaulted SLs for a mortgage app, so you had to do this, anyway.

 

Have you even been notified or found out who your new servicer is or if it is still with "us dept of ed"? Generally they only hold defaulted SLs.




Starting Score: 2•20 | EQ 550 | TU 498 | EX 505
Current Score: 11•20 | EQ [F8 615] [F9 653] [EQ5 645] [VS3 657] | TU [F8 600] [F9 552] [TU4 563] [VS3 639] | EX [F8 587] [F9 573] [EX2 614] [VS3 631]
Goal Score: 680


Take the myFICO Fitness Challenge

SO Starting Score: 2•20 | EQ 502 | TU 484 | EX 521
SO Current Score: 11•20 | EQ [F8 602] [F9 540] [EQ5 599] [VS3 534] | TU [F8 631] [F9 587] [TU4 572] [VS3 640] [VS4 634] | EX [F8 651] [F9 614] [EX2 630] [VS3 657]
Goal Score: 680


Take the myFICO Fitness Challenge



Message 2 of 5
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Senior Contributor

Re: Credit Score dropped 107 points after Student Loan Rehab, Trying to buy first home!

Definitely let us know which score this is (where you get it from - EQ is the bureau where the information is coming from, but doesn't tell us which algorithm is being used).

Overall, it will benefit your score - you have older, positive tradeline/s reporting.
Unfortunately, some servicers keep the lates (only the default/CA is guaranteed to be dropped), and the long lates (anything over 90+ days) is a major derog.   




F8 EQ: 804 | EX: 794 | TU: 801 | Accounts: 2/6 4/12 8/24
Happy practitioner of AZE9or10or11 | Team Finances > FICO
Message 3 of 5
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Frequent Contributor

Re: Credit Score dropped 107 points after Student Loan Rehab, Trying to buy first home!

Oh nooooooooo! I'm so sorry to hear this!  I hope that it's a temporary glitch. Maybe the loan company can update the bureaus that your payment is current. From my understanding the student loan rehab program brings you current so you shouldn't be penalized for any prior past due payments.  Hopefully it all works out for you with your house! 

 




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Valued Contributor

Re: Credit Score dropped 107 points after Student Loan Rehab, Trying to buy first home!


@Jordan23ww wrote:

Oh nooooooooo! I'm so sorry to hear this!  I hope that it's a temporary glitch. Maybe the loan company can update the bureaus that your payment is current. From my understanding the student loan rehab program brings you current so you shouldn't be penalized for any prior past due payments.  Hopefully it all works out for you with your house! 


This unfortunately untrue. They guarantee to remove the defaulted SLs (the CAs), but make no promises to remove old lates.

 

If picked up by a new servicer, they back date the opening to the original open date and will either give positive payment history or "ND" up until present time. This is even with the original SLs reporting with lates in the last 7 years.

 

If the OC decides to remove the lates after rehab or if the loans are reinstated with the original servicer and they decide to remove the lates, that is totally up to them.

 

From what I have seen it is a 50/50 shot and a crap shoot with no rhyme or reason who or why they pick people to remove all the old lates for or leave them all.

 

All I know for certain is that they despise when valid lates are disputed and since they generally do not start reporting until 60 or 90d late, they just love tacking on more, but valid, lates.




Starting Score: 2•20 | EQ 550 | TU 498 | EX 505
Current Score: 11•20 | EQ [F8 615] [F9 653] [EQ5 645] [VS3 657] | TU [F8 600] [F9 552] [TU4 563] [VS3 639] | EX [F8 587] [F9 573] [EX2 614] [VS3 631]
Goal Score: 680


Take the myFICO Fitness Challenge

SO Starting Score: 2•20 | EQ 502 | TU 484 | EX 521
SO Current Score: 11•20 | EQ [F8 602] [F9 540] [EQ5 599] [VS3 534] | TU [F8 631] [F9 587] [TU4 572] [VS3 640] [VS4 634] | EX [F8 651] [F9 614] [EX2 630] [VS3 657]
Goal Score: 680


Take the myFICO Fitness Challenge



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