Sallie Mae error caused credit scores to plummet
|By Leslie McFadden
Student loan provider Sallie Mae reports that the
coding error that caused some borrowers' credit scores to plummet
has been resolved as of Tuesday evening, May 13.
Some Sallie Mae student loan holders may have gotten
nasty surprises if they checked their Equifax credit scores after
Thursday last week. Their credit scores, based on their Equifax
credit files, had plummeted overnight, thanks to a coding error
made by Sallie Mae. While some of the borrowers were actually delinquent,
many were current on their payments.
Last Thursday, May 8, Sallie Mae made an error in the way it reported
some student loans to credit reporting agencies. Essentially, it
reported graduated or extended repayment plans as arrangements for
partial payment, causing Equifax, one of the three national credit
reporting agencies, to treat them as derogatory marks. Sallie Mae
spokeswoman Martha Holler says that "some of the credit monitoring
services then took the interpretation one step further and labeled
the derogatory mark a delinquency."
An extended payment plan allows the borrower to pay back the loan over 12 to 30 years as opposed to the standard plan, where the borrower has up to 10 years to pay back the loan. A graduated payment plan begins with low payments and the payment gradually increases every two years over a term of 12 to 30 years.
"There are some repayment plans that on our system
are considered a partial payment. They're still in a current status,
but they're essentially for an extended or graduated repayment plan,
and with our interpretation of these industry guidelines on how
to code that (is) where we made an error," says Holler. "What
happened was the way a credit bureau translates that, they read
that as a derogatory, when in fact that may not have been our intent."
Borrowers with extended or graduated repayment plans
who pulled their credit reports or scores sometime between Thursday
and Tuesday evening may have seen that "one or more of their
accounts show up as delinquent, and had an adverse credit rating,"
says Tom Joyce, spokesman for Sallie Mae.
Some student loan holders complained in the FICO forums
that their FICO scores had dropped 100 points or more due to Sallie
Mae's snafu. Since then, some have reported that their scores returned
to where they were before the error was made.
Joyce says "less than 10 percent" of their
10 million borrowers, or less than 1 million borrowers, were affected
by the mistake.
Credit reports restored
Holler reports that the issue was resolved and customers' credit
reports were corrected on Tuesday evening. "We are pleased that
customers' credit reports have been restored to what they would
have and should have been," she says.
Sallie Mae will supply a credit reference for people
who need one to correct their credit scores or prove to a potential
lender that the error is Sallie Mae's. Sallie Mae urges borrowers
concerned about the mistake to call (888) 2-SALLIE or (888) 272-5543.
All credit reporting agencies have been notified of
the issue and consumers do not need to pull their credit reports
if they have not already done so, nor do they need to dispute the
error with the credit bureaus, says Joyce. They should call Sallie