Living with credit, Protecting yourself

Sallie Mae fixes FICO score issue

Jeremy Simon

Sallie Mae last night resolved a coding error that caused the FICO scores of around 1 million student loan borrowers to suddenly plunge more than 100 points.

The error was caused by a change in the way U.S. student loan provider Sallie Mae reported its graduated payment plans to credit bureau Equifax, making it appear as though even responsible borrowers had been delinquent with their loan payments. According to Sallie Mae, a coding error caused credit monitoring systems to alert customers that their Equifax credit scores had taken a serious beating.

Sallie Mae spokeswoman Martha Holler tells me that the borrowers’ Equifax credit histories never actually showed a delinquency, but rather made borrowers appear derogatory. “This never happened before, and it will not happen again,” Holler says. “We fully understand the importance of a consumer’s credit rating and that is why we worked with great urgency to resolve the situation. We sincerely apologize for the error and are pleased that our customers’ credit reports have been corrected.”

With graduated payment plans, “the loans allow borrowers to make smaller payments, sometimes covering only the interest owed, for a few years before increasing to full payments,” says personal finance writer Liz Pulliam Weston in an article online. “But within the past week, Sallie Mae began reporting the loans to credit bureau Equifax as essentially delinquent, sending borrowers’ scores plunging.”

Sallie Mae notations on Equifax credit reports showed “arrangements made with credit grantor to make partial payments” — language that typically means the borrower arranged to pay less than the full amount owed. That switch slammed the credit scores of borrowers who signed up for graduated-payment loans, potentially impacting up to 10 percent of Sallie Mae’s 10 million borrowers.

The forums included posts from a wealth of angry and concerned borrowers.

“Sallie Mae has to fix this issue ASAP! My credit score dropped by 142 points!” writes lost1dream in a post on the forum. “Even if Sallie Mae is able to push a button tomorrow and fix this, it is inexcusable. The pain and fear this is causing people is beyond comprehension” writes smg53. “Although I am sure that I can show my mortgage lender that nothing has changed since they pre-approved me, I am going to have to jump through a lot of hoops to get this figured out.”

While it seems this credit reporting crisis has passed, it’s always a good time for borrowers to check their credit reports and dispute any potential errors they find.

By the way: In case you missed it (I did), my blog post “In credit score calculation, loan type matters,” was featured in the first Carnival of Credit Tips & Advice back in April hosted by Credit Card Assist.

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  • KB

    I wouldn’t speak so soon. Many people are now reporting duplicate entries on their credit reports -even those who were NOT originally affected with Sallie Mae’s first error.

  • Sounds like the problem wasn’t as easy to correct as Sallie Mae indicated.
    Have any other borrowers experienced duplicate credit report entries?
    I can include responses in a future post.

  • Shannon

    I too am experience duplicate credit report entries. Now it looks like my monthly payments are doubled, seriously damaging my DTI!

  • Thanks for all the input — please see my follow-up post: