Source
r/personalfinance•
Stedw

Student Loan Deferment Dropping Credit Scores, Explained

Debt

As you know there have been a lot of post about SL deferment dropping credit scores on here. It is now being reported that the reason for the CARES act student loan deferment lowering credit scores has been explained. In the CARES act it was mandated that it not be reported as a deferment to the credit bureaus but it did.

The CARES act was passed to close to the date they report each month to the credit bureaus so they did not have time to reprogram the system and the data went out.

It was supposedly fixed and the new monthly reports to the credit bureaus went out today removing the comment on credit reports. It may take a while to work its way through the system but things should return to normal.

Posted May 11, 2020, 7:14 PM UTC

1212
ITS_JUST_LOW_T​•

My score dropped 7 points because of this. I've seen it vary more than that for literally no reason at all. I feel like if this is actually wrecking your credit you should take it as a wake up call that you need to take other steps.

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browserz​•

I didn’t even notice if it did anything for me, my credit score bounces between 760-780 on any given month according to credit karma and any of my credit cards.

Was 761 in all of March and 771 in April and 772 currently. Next month I’d expect it’ll drop to 760ish all over again for no reason. My spending hasn’t changed and I’ve stopped paying my student loans as of March when my great lakes switched my loans to 0%

2
butterfreeeeee​•

none of this is right. and 99% of people here don't know how credit scores work so just saying things "should return to normal" doesn't really help people if they don't know what normal is

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StedwOP​•

Everyone of the people posting know what their credit score, at least their Vantage 4.0 score, was before the status of in forbearance was added.

It will be as if the remark was ever added and the loan is current. That was specifically spelled out in the CARES act that it must be reported as if the payment was made and the account is current, i.e no impact.

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dwinps​•

I'm not convinced that remarks in a credit file impact credit scores, the actual text of the CARES Act says:

REPORTING TO CONSUMER REPORTING AGENCIES.—During the period in which the Secretary suspends payments on a loan under subsection (a), the Secretary shall ensure that, for the purpose of reporting information about the loan to a consumer reporting agency, any payment that has been suspended is treated as if it were a regularly scheduled payment made by a borrower.

I'm not sure exactly what that means, whether it means a regularly scheduled payment of $250 must be reported as a $250 payment or ???.

Currently they are being reported as $0, ie no payment made, and that might be what screws up the credit score.

Do you have a link to something more definitive?

2
StedwOP​•

The source was the President of the Institute of Student Loan Advisors, FYI that is a verified account. [Source]

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1
Mortimar84​•

The deferment for my Great Lakes student loan dropped my score by 62 points. When they removed the remark it only went up 56 points. That’s not fair to me, for the reporting agency, or student loan company to still have a negative effect and call it even.

1
StedwOP​•

The odds are the posting of that remark was not responsible for the 6 point difference. When you have a "young" credit score with few thing in the file any small change can cause a 6 point swing.

On my credit it takes a tank to move it 1 or 2 points either way. I once, as a test, increased my utilization by 30 points. It only moved my score 3 points down then 3 points back up when I lowered it the next month.

2
Mortimar84​•

It’s just odd that the only thing I did for that month was pay, even more than the minimum, and makes my score lower. If making payments lowers my score, then my best course of action would be to stop paying.

1
StedwOP​•

Paying does not lower your score.

Do you have a credit card or any other line of credit other than your student loans. A difference of a few dollars from the previous month in your card statement balance can swing your score because of your utilization change.

The credit scoring models are incredibly complex algorithms. They do not just generate a score they profile your habits and what tendency people with that profile/habits have to pay their bills, or fail too pay them. When we give advice it is based on generalities because the people that wrote the credit score models are smart with numbers in a way we could never understand and they do not release the actual model programming itself.

It will get back up as long as you keep making your payments on time.

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