Bad debt may not appear on credit report

Steve BucciQuestionDear Debt Adviser,
I have some serious questions about my credit. I have some substantial outstanding debt from college that, due to negligence, has gone to collectors. However, when I got a credit report it did not show up, although other things did. I had a co-signer. Does that mean it showed up on their credit report instead? How do I develop a payment plan? I am asking these things because I am working toward entering the United States Coast Guard and know that bad credit could be the only thing that keeps me out. Thank you for any advice you can give me.
-- David

AnswerDear David,
You're definitely showing signs of progress! Words like "serious" and "negligence" indicate to me that you have matured and are on the right track to a great life. I can't think of a better place to launch your career than with the U.S. Coast Guard.

There may be a number of reasons your delinquency hasn't shown up on your credit report. It could be that your lender doesn't report to the credit bureau. Not all lenders do. Particularly if your student loan was a private one from the school, they may not. Another possibility is that your information has gotten mixed up with someone else's.

With more than one billion pieces of information being reported each day to the three major credit bureaus, it is not uncommon for mistakes to be made. There may be a transposition or other mistake in your identifying information. This could be something as simple as a jumbled Social Security number, an old address or the wrong middle initial in your name.

Debt Adviser's quick tips:
  1. Contact your co-signer.
  2. Contact the original lender.
  3. Try to refinance the loan alone.

I recommend contacting your co-signer to find out if any of your accounts are being reported on his or her credit report. This will accomplish two things. First, you can assure your co-signer that you are planning to pay what you owe. Second, you can get any contact information for accounts that appear on the credit report.

Expect your co-signer to be upset. I would be! Be prepared with a short explanation of what happened, a longer explanation of how you are going to fix this quickly -- and a fat apology.

Plan to contact any collectors that may appear on your co-signer's credit report with your proposal to pay what you owe. Be sure to keep your co-signer up to date on what's going on until this debt is fully paid. Ideally, you'll be able to get a personal loan from some other source to repay the student loan even if the interest rate is higher. Why? That way your friend can get off the hook sooner. If you don't have a lump sum to pay off the loan, be sure that you only offer to pay each month what you can realistically afford.

If there is no record of the loan on your co-signer's credit report, contact the original creditor(s) and request a chance to repay the loan through them and not a collector. Tell them about your Coast Guard plans; it won't hurt and it might help. At a minimum, find out where your debt has been sent for collections.

As far as getting your credit report in the best shape possible before you apply to the U.S. Coast Guard, the best advice is to pay any late balances to bring them current. Remember, you aren't concerned with your credit score, just what your report says to the Coast Guard. You want it to say that you have a problem (we all do), you are taking decisive action and you are keeping your commitments, even though it isn't easy.

I suggest that you speak to someone in the Coast Guard who knows you. They may have more specific suggestions for what they want to see on your credit report. If you don't know anyone, you might seek advice from Coast Guard Mutual Assistance, an independent service organization that serves Coast Guard families.

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