Defaulted Student Loans - Bad Credit?
A defaulted student loan will put you in a complicated situation. You will likely have to repay the loan and your credit will be ruined. This is what happens when your loan is defaulted on; your accou...
This is what happens when your loan is defaulted on; your account is sent to collection agencies and then there are various collection efforts. The government can garnish your wages, your social security benefits and more.
These debts can be collected upon for life! However you can only have a negative mark on your credit report for a maximum of seven years. This is according to a law that Congress created called the Fair Credit Reporting Act.
If you have a defaulted student loan on your report, more often than not you will be turned away for a new line of credit. You are likely to have to pay interest rates of roughly 25% and place large down payments just to be approved.
However there is hope you can remove this mark from your report and with some luck you may be able to remove the debt entirely. In order to do this you should dispute the collection marks on your report.
A dispute letter should be sent to each bureau containing a reason as to why the mark is not correct. Examples may be the account is paid in full, the mark has already been reported for seven years, not my account, and so forth.
This is the most difficult item to negotiate on a credit report and thus we suggest that you should hire a credit repair service to dispute it on your behalf. The benefit is you will have a licensed attorney fighting for you and there are continuously new laws passed by congress to help protect consumers.
You credit score impacts every aspect of your life and thus we feel it is worth the money to hire an expert. This can be done at very reasonable rates and compared to the high cost of low credit score it is a good idea.
You should be aware that a loan from the government such as the Perkins loan or a Stafford loan will be much harder to remove from your report. However a private loan such as one with Sallie Mae will still be difficult to remove but easier than a federal loan.
The creator of the negative mark will be contacted by the bureaus and asked to verify the debt, including that the account is yours, the balance of the account, and that the dates are correct. This will take place as soon as the bureaus receive your dispute letter.
If the account can not be verified then the negative mark must be removed from your credit report. This is due to the Fair Credit Reporting Act saying that any unverifiable mark on your credit report must be removed.
If this mark is in error then send any documentation that you have with your dispute letter to prove it is in error. The bureaus make errors all the time and so do the lenders, but your credit is the one that will suffer. It is estimated that 1 in every 4 people have an error on the report that is costing them money in higher interest rates.
In conclusion, defaulted student loans are removed every day from credit reports. If you have this, it does not mean you will have a low credit score for the rest of your life. We suggest you dispute this mark with the credit bureaus.
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