Questions about defaulted student loan.

hideous · ‎04-04-2013

I am in process of repairing my credit in order to get a mortgage. Most of the questions relate to the student loan itself so I am putting it in this section.

I have questions about How they are reporting and how the rehab process works?

I got 1 student loan for 3500 back in Oct 2004 I paid it on time until August 2007 I actually had a reason to not make payments but did not do the right paperwork, didnt even know it existed.

All my reports have different information

On my EX credit report it shows ACS/WASH STUDENT LOAN FI.... and reads Clain filed with government scheduled to continue on record until Jun 2014.

On my TU credit report it shows ACS/BKAMERICA...and shows basically the same infor as EX but doesnt have a removal date.

On my EQ credit report it shows SALLIE MAE and shows basically the same info as TU there is no removal date. Also on EQ there is another tradeline for NW ED LOAN this tradeline actiually shows the correct ballance i believe the others just show the original loan amount, there is no removal date stated.

On Scorewatch which is EQ its showing that I owe both amounts combined so 3500 from SALLIE MAE and 2300 from NW ED LOAN for a total of 5800 and in the accounts section its showing them both as negative.

Questions

1. How can EQ show this loan twice?

2. Why are all the tradelines different titles? (ACS/WASH STUDENT LOAN FI...., ACS/BKAMERICA..., SALLIE MAE and NW ED LOAN)

3. Why does EX have a date the tradeline will fall off and the others do not? I thought student loans reported indefinetly unless paid off?

My attempt to repair

NW ED LOAN contacted me and asked me to pay off the ballance in full of 2,254. I read somehwere that its better for your credit to go through a 9 month process I believe its called rehab? where they take like 75 a month and then at the end of the 9 months you can refi it back to a normal loan. I read that this is the "best" way to handle a bad student loan because negative tradelines will be deleted becasue each loan can only show once and since the loan is a new and current loan then the old tradeline must go.

Questions

1. If I am out to get a mortgage in say 2 months and its a government loan then whats the best way to handle this? got through the process or just PIF?

2. Is the information I heard about getting these tradelines removed accurate? after 9 months they will vanish? or is it after I find a company to get the new loan with? or ever?

3. As stated earlier my EX report says this tradeline will go off my record June 2014, will making payments alter or reset this? Will paying in full get this off my record in a year as stated June 2014?

4. This 9 month process, what is it called and do I need to do anything special from this point like a new loan application?

Thanks in advance to anyone that helps answer these questions.

Anonymous · ‎04-05-2013

Hi Hideous, welcome. I'm going to work on your second set of questions first, if that's cool.

1) Has your loan defaulted? You didn't specify. I'm going to assume that it has. If you PIF, the default remains on your credit report. You'll likely run into a difficult time getting a mortgage, especially with a government loan. Uncle Sam isn't likely to lend you money if you have a default from the last time you borrowed. If you can wait on your home purchase, I would encourage you to consider rehabilitation.

More info here: http://www.studentloanborrowerassistance.org/default-and-delinquency/repayment-get-out-of-default/

2) It's accurate, but with a caveat - it takes 9 months of payments to complete rehab but could take an additional 30-60 days to get the credit report straightened out. So if you're trying to plan a timeline, you'll want to make sure to account for that. There was in issue in 2012 where loans were not getting picked up post-rehab, but that seems to be in the past as of 2013. Loans are being picked up fairly quickly.

3) Making payments will not alter the DOFD, which is what that drop date is based on. But honestly, the govt has a long memory; this could still come back to haunt you. You'll spend no more time to rehab than you would waiting for this to drop, but you'll have the default cleared. That's a good thing.

4) Program is called Rehabilitation. No new application, you would just call the collection agency assigned to the loan.

hideous · ‎04-05-2013

Thank you for your responce invinciblesummer3 I read that link you gave me alot of good info. Howerver, it raised a few more questions.

I read about how when you defualt on federal money you get put into Credit Alert Interactive Voice Response System (CAIVRS), and I read that after rehab you are taken out. What happens as far as getting a USDA or FHA loan in the between time? I read that if you have a written agreement in place and are currently making payments this can be good enough? I tried to find a way to call the CAIVRS system but doesnt appear to be open to the public. I just made my 3rd rehab payment 4/1 and t hey said they are mailing me an agreement, is this the "agreement" thats needed to get federal loans but still be in default?

SCF · ‎04-05-2013

The default status doesn't clear until the rehab is completed and the loan is sold back to a regular servicer. I think I've read here that folks were able to get CAIVRS cleared with the letter stating that their rehab was complete (vs. waiting for everything to report automatically to CAIVRS and the CRAs). I don't think that being in the process will get you cleared for other federal loans, because (and I'm not saying you would), you could always just stop paying the rehab.

That said, I'm not positive on that, and it's always possible there are exceptions. I would talk with your mortgage lender and show them that agreement.

Anonymous · ‎04-05-2013

@SCF wrote:
The default status doesn't clear until the rehab is completed and the loan is sold back to a regular servicer. I think I've read here that folks were able to get CAIVRS cleared with the letter stating that their rehab was complete (vs. waiting for everything to report automatically to CAIVRS and the CRAs). I don't think that being in the process will get you cleared for other federal loans, because (and I'm not saying you would), you could always just stop paying the rehab.

That said, I'm not positive on that, and it's always possible there are exceptions. I would talk with your mortgage lender and show them that agreement.

+1. And just because I'm curious - are your scores high enough to get a FHA/USDA loan now, even with the default showing? I understand it is possible to clear CAIVRS if you PIF, but it won't help your score at all. If you need to rehab to get the score boost, then you're far better off waiting.

hideous · ‎04-05-2013

My scores are all within 5 points of 600 cant remember which place is which score.

I have went up 40 points in the last month becasue I got a judgement removed that my state put on me for no reason. Long story short they thought I owed them money, I didnt, they said they needed me to fill out some paper I did, While it was in thier hands they got a judgement, then found the paper and vacated it. However, until I "motivated" the CRA's they just let it sit there.

I have 5 collections I am validating, distputing, offering PFD, etc.

Only baddies in the last 2 years is 1 30 day late and 1 collection. Working those the hardest.

Most of the rest of these are 5 years old.

Oh and I have 1 5k limit cc that was at 4800 and I just paid it so I am hoping for a score jump on the 21st of the month.