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A blunder by student lender Sallie Mae briefly trashed the credit scores of hundreds of thousands of unwitting borrowers who signed up for the company's graduated-payment loans. The loans allow borrowers to make smaller payments, sometimes covering only the interest owed, for a few years before increasing to full payments. But within the past week, Sallie Mae began reporting the loans to credit bureau Equifax as essentially delinquent, sending borrowers' scores plunging.
Sallie Mae officials said Wednesday that they had fixed the problem and that borrowers' scores had returned to normal. The error affected "less than 10%" of the lender's 10 million borrowers, a spokesman said. Elan Glasser of Santa Monica, Calif., received an e-mail alert from his credit monitoring service this week that his Equifax FICO score had dropped 81 points, from 727 to 646. (A score above 720 on the 300-to-850 FICO scale is generally considered good; 620 to 660 is considered mediocre.) When he investigated, Glasser found nothing significant had changed on his Equifax credit report -- except a notation on his Sallie Mae account of "arrangements made with credit grantor to make partial payments."
Such a notation is typically used for debt settlement arrangements in which the lender is paid less than the full amount owed. As a result, borrowers' Equifax credit reports showed the loans as seriously delinquent, with past-due balances and a recent history of missed payments -- all extremely detrimental to credit scores, which lenders use to gauge creditworthiness.
"Suddenly, I look like a deadbeat," Glasser, a filmmaker, said Tuesday. "I'm worried now that my interest rates will go through the roof."
Sallie Mae officials said the coding error was included in a recent download of credit information to Equifax. The other credit bureaus, Experian, TransUnion and Innovis, were not affected, they said. Sallie Mae fully understands the importance of one's credit rating, and we sincerely apologize for this error," company spokeswoman Martha Holler wrote in an e-mail Tuesday afternoon, when the lender was still working on a fix. "We are working with great urgency to ensure that the affected credit reports are corrected quickly; in fact, we expect full resolution within the next day. Once the issue is resolved, the payment histories will appear as they would absent our error.
Federal law prohibits creditors from reporting false information to credit bureaus and allows consumers to sue for up to $1,000 for violations. It's unclear, though, whether a goof such as this one qualifies as a violation of the law, particularly if the problem is fixed soon.
A blunder by student lender Sallie Mae briefly trashed the credit scores of hundreds of thousands of unwitting borrowers who signed up for the company's graduated-payment loans. The loans allow borrowers to make smaller payments, sometimes covering only the interest owed, for a few years before increasing to full payments. But within the past week, Sallie Mae began reporting the loans to credit bureau Equifax as essentially delinquent, sending borrowers' scores plunging.
Sallie Mae officials said Wednesday that they had fixed the problem and that borrowers' scores had returned to normal. The error affected "less than 10%" of the lender's 10 million borrowers, a spokesman said. Elan Glasser of Santa Monica, Calif., received an e-mail alert from his credit monitoring service this week that his Equifax FICO score had dropped 81 points, from 727 to 646. (A score above 720 on the 300-to-850 FICO scale is generally considered good; 620 to 660 is considered mediocre.) When he investigated, Glasser found nothing significant had changed on his Equifax credit report -- except a notation on his Sallie Mae account of "arrangements made with credit grantor to make partial payments."
Such a notation is typically used for debt settlement arrangements in which the lender is paid less than the full amount owed. As a result, borrowers' Equifax credit reports showed the loans as seriously delinquent, with past-due balances and a recent history of missed payments -- all extremely detrimental to credit scores, which lenders use to gauge creditworthiness.
"Suddenly, I look like a deadbeat," Glasser, a filmmaker, said Tuesday. "I'm worried now that my interest rates will go through the roof."
Sallie Mae officials said the coding error was included in a recent download of credit information to Equifax. The other credit bureaus, Experian, TransUnion and Innovis, were not affected, they said. Sallie Mae fully understands the importance of one's credit rating, and we sincerely apologize for this error," company spokeswoman Martha Holler wrote in an e-mail Tuesday afternoon, when the lender was still working on a fix. "We are working with great urgency to ensure that the affected credit reports are corrected quickly; in fact, we expect full resolution within the next day. Once the issue is resolved, the payment histories will appear as they would absent our error.
Federal law prohibits creditors from reporting false information to credit bureaus and allows consumers to sue for up to $1,000 for violations. It's unclear, though, whether a goof such as this one qualifies as a violation of the law, particularly if the problem is fixed soon.