How to remove a late student loan payment from your credit report.
When we think of problems with consumer debt, maxed out credit cards, mortgages for homes underwater in equity, or even high-interest auto loans may come to mind. But did you know that the prevalence of student loans has grown faster than all of those in the last decade? In fact, student loans are at an all-time high, as Americans owe a combined $1.48 trillion in student loans. That’s $620 billion more than the total U.S. credit card debt, despite a much smaller pool of only 44 million student loan borrowers.
More facts about the prevalence of student loans:
The average college graduate with student loans left school with just shy of $40,000
We’re not only borrowing more student loan debt than ever before but starting to slip up on payments at a scary rate. Right now, the student loan delinquency rate is a shocking 11.2%. However, to be counted in that delinquency rate, you must miss 90 days-worth of payments – not just one.
Not making the grade with student loan payment:
With the average student loan payment now $351 for borrowers ages 20 to 30, it’s no surprise why credit reports are pocked with missed loan payments like never before.
If you’re paying student loans (like so many others), then you may have missed a payment at some point (still like so many others!). Maybe you got laid off from work and couldn’t get a student loan deferment in time, or sent in the payment but there was a delay because of a holiday weekend so it posted late, or the check just got lost in the mail!
Sudent loan payments and credit score:
No matter the reason, missing a student loan payment will do some serious damage to your credit score. According to Equifax, one of the Big Three credit reporting agencies, a consumer with good credit who misses their first student loan payment might expect a 100-point drop in score. And if you miss multiple payments, you may be looking at another 70-point drop with the second and third 30-day late.
Furthermore, student loans need to be handled with extreme caution, since you can’t erase them with a simple bankruptcy and lenders can even sue you, garnish wages, or seize assets if you fail to pay.
Of course, with any missed payment, whether for a credit card, mortgage, or student loan, the negative reporting will show up on your credit report, where it will stay for up to seven years before naturally “falling off” your report.
In that time, your credit score will be compromised, and you may have a difficult time getting approved for new loans, qualifying for low interest rates, and can even see your other payments jump up.
But the good news is that it may be possible to delete that late student loan payment from your credit report, erasing the negative item so you’re score can rebound.
So, how can we try to get your late student loan payment removed from your credit report?
The first step is simply to contact your student loan lender or servicer and ask if they will remove the late payment. Called a “Goodwill Adjustment” or removal, they have the power to take the missed payment off of the records that they submit to the credit bureaus, thereby allowing the negative item to disappear.
Why would they do this for you? That’s a good question, as they may not – or may not agree the first time you contact them. But it’s possible that you can negotiate with them to remove that payment by making your case – and/or giving them some incentive to do so.
For instance, you may be able to communicate with a sympathetic lender that you had a legitimate reason for missing the payment, like you were in an accident, hospitalized because you were sick, the bank made an error, etc.
You will also have more success with this if you can show a track record of always paying on time in the past (so this is an isolated incident), as opposed to if you miss payments periodically.
You can also present it as a win-win to the lender by offering some assurance that you’ll get back on track with payments. You should offer to submit a payment to make you current, of course, in exchange for their promise to remove the late from your credit (just make sure to get it in writing!).
But you can also offer to set up the student loan payment on auto pay with your bank, so it’s virtually impossible that they’ll be late or missed in the future. That gives them a clear indication that you’re serious about getting back on track and minimizing any risk for them.
Of course, you can call up and talk to a customer service representative at your student loan servicer, and that may be a good place to start (be nice!). But you’ll probably want to apply for a Goodwill Adjustment more formally, in writing with a nice letter…or two if necessary.
Just remember that they’ll probably dismiss your pleas if you’ve missed payments before in the past or are seriously behind from multiple missed payments.
If your student loan company or servicer has denied your request for a Goodwill removal of a late payment, it may be time to escalate the situation with a formal dispute.
There are strict laws that govern credit reporting, like the federal Fair Credit Reporting Act (FCRA) and several more. By understanding the process and filing a formal dispute, you turn the law onto your side. You can attempt to file a formal dispute yourself, but if you truly want the best chance at success, it’s better handled by a reputable credit repair firm like Blue Water Credit, who has the knowledge, experience, dedicated staff, and resources to repair student loan missed payments and other negative items from your credit.
If there is anything at all that’s incorrect, inaccurate, mistaken, or in-duplicate about how your student loans – or late student loan payment – are listed on your credit, you may be able to leverage that erroneous reporting and force the creditors to clean your credit.
In fact, whether a dispute points out a valid correction or not, the credit bureaus and your lender will be required to respond with proof within a certain time frame. If they cannot or do not in time – or at all – then the negative item is stricken from your credit.
If this happens, you will still owe the debt and be responsible for paying, of course, but the negative reporting can and will be cleared from your report, allowing your score to rise once again.
Turning to a reputable credit repair firm like Blue Water Credit offers your best option for disputing missed student loan payments and having them deleted from your credit report if all else fails.