Your credit report is one of the most important documents you have, and unfortunately, there may be some unfavorable aspects on it.
And if you have student loan debt, you may be wondering how it impacts your credit report.
A student loan is either in good standing, or it isn’t. If your student loan is in good standing, you will want to keep it on your credit report. If your student loan is in default, you want to have it removed from your credit report.
But let’s clear something up: student loans cannot legally be removed from a credit report. Unfortunately, there is no magic formula to remove negative information on your credit history.
If your loans are in default, there are some steps you can take to improve your credit history.
Let’s look at how you can improve your credit report, even with defaulted student loans.
How to Remove Negative Student Loan Information From Your Credit Report
In general, you cannot remove student loan information from your credit report. Whether paid off on time or defaulted, that information will stay on the credit report for seven years.
You shouldn’t want to remove positive student loan information anyway: payment history is the most important factor contributing to your FICO credit score, and a positive payment history will only improve your score.
Having a student loan and making your monthly payments will not prevent you from obtaining a mortgage or other type of loan. If anything, it will increase your chances of getting one, as positive payment history is the most significant factor in your credit score.
Positive credit information stays on your report for 10 years, so repeated on-time student loan payments will benefit your credit history for up to a decade.
If your payment history is less than ideal, or if you’ve defaulted, your credit report will be negatively impacted. Unfortunately, there is no way to remove negative information from your credit report unless it was made in error by the student loan issuer.
Only when the information is inaccurate can credit information be removed.
While you can’t pay to remove your defaulted student loan information from your credit report, you can take steps to mitigate its negative impacts.
Remember: a FICO credit score is calculated by payment history, amounts owed, length of credit history, new credit accounts, and types of credit used. Only the payment history matters. The amount owed on a student loan does not factor into the FICO credit score.
Types of Student Loans
There are two types of student loans, and you have different options based on what type of student loan you have. In general, student loan information stays on your credit report until they’re paid off, or if it’s been seven years since the student loan went delinquent.
Federal Student Loans
Federal loans offer more flexibility when it comes to credit repair options. Compared to private student loans, there are many options available to those with a federal student loan.
If you have defaulted on a federal student loan, they offer options to get their borrowers out of default.
They have an income-driven payment plan or student loan consolidation plan, where the amount owed on your student loan can be lowered to a small percentage of your monthly income.
Those who defaulted on a federal student loan can opt for loan rehabilitation, where if you make 9 out of 10 consecutive on-time payments, the default can be removed from your credit record.
While these options will make paying off the student loan easier, they will not remove the default status from the original loan.
If you haven’t defaulted and work in the public sector, see if you qualify for their public service student loan forgiveness program. Applicants can have their federal student loans forgiven if they work for a governmental agency or an approved non-profit.
Private student loans
Unfortunately, those with private loans do not have many options when defaulting on student loans.
If you’re experiencing economic hardship, private lenders may offer forbearance, but it is highly unlikely that they will remove late payments or other negative information from your report.
What Can You Have Removed From Your Credit Report
While accurate information cannot be removed from your credit report, any information that is inaccurate is able to be removed.
If any of these scenarios apply to you, these mistakes can be removed from your credit report.
- The origination date of the loan is incorrect
- The reported loan balance is different than your actual balance
- An on-time payment was reported as being late
- A student loan that was paid in full was reported as open and active
- The student loan status is in repayment plan but is reported as being in forbearance or deferment
Steps to Removing Negative Marks From your Credit Report
If you have a negative mark on your credit report, it’s important to deal with them straight away.
Check your credit
First and foremost, you should regularly check your credit report for errors.
There are three major credit bureaus: TransUnion, Equifax, and Experian. They will have your credit report and credit history. You can get your free credit report by visiting annualcreditreport.com.
Check for account balance, payment status, or disbursement date. If any incorrect information exists, file a dispute immediately.
File a dispute
You can file a dispute either online or by sending the information through the mail.
Be sure to send all relevant information and evidence of error and a proof of identity like a copy of your passport, Social Security card, or electricity bill during the dispute process.
Proof of sending is essential, so mail your documents “return receipt requested.” This way, you will know that the credit reporting company received it and are working on resolving the issue.
Keep records of all information sent. Having a paper trail will be beneficial in case any disputes pop up.
Wait for a response
It may take some time to hear back from your credit reporting company, but it shouldn’t take longer than 30 days. Federal law gives the companies 30 days to investigate the dispute and contact your loan servicer.
The entire process can take at least two months to go through.
Tips to Improve Your Credit
Defaulting on a student loan doesn’t have to signal death to your credit score.
There are many ways to repair your credit after defaulting on a student loan.
Here are five tips to improve your credit:
Make sure there are no errors on your credit report
As we mentioned, monitoring your credit is essential to maintaining a good credit report.
Continually check your reports to ensure no costly errors are reported. Also, be on the lookout for identity theft or other issues like fraudulent loan applications.
Pay bills on time
The easiest way to maintain a good credit score is to pay bills on time. Payment history accounts for 35% of your FICO score. Unfortunately, making on-time payments might be easier said than done.
It is imperative to build responsible spending habits that will not put you at risk of missing credit payments.
Pay down debt
The amount of debt you owe factors into your credit score. Paying off credit cards will go far in improving your credit score.
You can take many approaches to debt repayment, and they all have different payoffs. Your credit score will improve when you pay your debts, no matter which debt paydown method you choose.
Avoid additional debt
If you’re looking to improve your credit score, avoid taking out any excess debt.
Keeping debt balances low is essential to having a high credit score. Don’t take out new loans or open new credit accounts, especially if you think you will have trouble paying them on time.
Get a Secured Credit Card
If you have trouble paying bills, it may be best to avoid credit cards altogether. However, using a debit card does not impact your credit history, so consider using a secured credit card.
Secured credit cards are an excellent way to build credit, especially for people with bad credit or no credit at all. This credit card type requires the user to make a cash security deposit upon account opening. If you happen to miss a payment, the issuer will take the amount owed from the original deposit.
A good secured card we recommend is OpenSky Secured Card. They have great customer service and their fees are reasonable. Visit OpenSky simply by clicking on the button below.
Credit Repair Companies
Consider using a credit repair company if you’re in the market to get a home loan or auto loan and want to take advantage of the best rate. If you have a ding on your credit report and you’ve done everything you can to remove it with no success, a credit repair company may be able to help.
A few companies we recommend are Credit Saint and Sky Blue Credit Repair.
Credit Saint is a credit repair company that has been in business since 2004. They have an A+ rating with the Better Business Bureau and have helped remove charge-offs and other negative items from people’s credit reports.
Credit Saint offers a wide variety of services to help you fix most derogatory marks on your credit report, such as late payment, charge-offs, and other services.
They can help you with credit counseling, credit monitoring, and identity theft protection.
Credit Saint has a high customer satisfaction rate and offers a money-back guarantee on all their services.
Blue Sky Credit Repair
Sky Blue Credit Repair is another credit repair company that has been in business since 1989. They have an A+ rating by the Better Business Bureau and have high customer satisfaction.
Like Credit Saint, Sky Blue Credit Repair can help you remove a charge-off and any other delinquent credit accounts from your credit report. They also offer a money-back satisfaction guarantee on all of their services.
Both Credit Saint and Sky Blue Credit are reputable credit repair companies with a long history of helping people repair their credit. If you’re struggling to remove a charge-off from your credit report, hiring one of these professionals may be the best step for you. However, like with any service, it’s a good idea to conduct your due diligence to ensure these services are right for you.
Wrapping It Up
Student loans can positively impact your credit score, especially if they are always paid on time. Only when you miss payments that having student loans will negatively impact your credit report.
It is only possible to remove student loan issues from your credit report if the information provided to the reporting bureau is incorrect.
Any negative marks on your credit report, like missed payments or defaults, are there for up to seven years.
Your credit report is important. Improving your credit score can be difficult and can take months or even years to achieve, but it is a worthwhile endeavor that will only have positive impacts on your life.