The Frugal Creditnista

Student Loans Ruining Credit Scores During the Pandemic? – What can you Do?

If you’re finding that your student loans reported incorrectly on your credit report and ruined your credit score during the pandemic, you aren’t alone! 

Great Lakes, one of the largest student loan servicing agencies, is accused of violating the student loan debt relief as outlined in the CARES Act. As a result, millions of student loan borrowers have dilapidated credit scores that they wonder how they’ll ever fix. 

A class action lawsuit is in the works against not only Great Lakes, but Experian, Equifax, TransUnion, and VantageScore too. The lawsuit claims that even though the CARES Act paused all federal loan student payments between March 13, 2020 and September 30, 2020, millions of student loan borrowers saw their credit scores drop drastically due to what Great Lakes claims is a ‘coding error.’ 

On Aug. 8, 2020, President Trump directed the Secretary to continue to suspend loan payments, stop collections, and waive interest on ED-held student loans until Dec. 31, 2020.

Many graduates found their accounts reported ‘deferred’ not lawfully paused as the CARES Act allowed. The effect of the incorrect coding has been devastating for graduates throughout the country. 

Taking the Next Steps to Fix your Credit 

While a lawsuit is great, it won’t help your credit scores in the meantime. It’s up to you to pick up the pieces and fix your credit. 

If you have student loans, your first step should be to pull your free credit report. Until April 2021, all consumers have free access to their credit reports from each credit bureau weekly. Head here to pull your reports and keep doing so to make sure your credit gets fixed. 

If you’ve been affected, do the following: 

  • Contact the Student Borrower Protection Bureau here. Complete the form and see what advice and resources they offer. While they don’t provide legal protection, they can point you in the right direction and they’ll have more information to bring in front of legislators as they fight this battle. 
  • Contact your student loan lender. Let them know of the mistake (I suggest in writing) and request that they fix the data.   
  • Contact the credit bureaus reporting the incorrect information, also in writing. Credit bureaus have 30 days to respond to your request. 

When you contact the lender and credit bureaus, request that they place a note on your file that states that the negative information reported was due to COVID-19 and inaccurate information. 

Be Proactive When Dealing with your Credit 

Any student loan borrowers (or any consumer for that matter), even those that weren’t affected by the negative reporting should always protect their credit. 

  • Check your credit report often. If you notice incorrect information or fraudulent activity report it to the credit bureau and lender right away. 
  • Use two factor authentications on all banking and other financial websites.  
  • Change your online passwords every few months. 
  • Don’t share your account numbers or other private information with anyone else. 

Do you Need to Freeze your Credit? 

If you’ve been a victim of any type of credit card fraud or issues, freezing your credit, or at the very least, putting a fraud alert on your credit helps. 

Knowing the difference may help you decide: 

  • A credit freeze means no one can check your credit, even with your permission. If you apply for new credit, you must lift the freeze temporarily to allow the lender to check your credit. You can refreeze your credit when they are done. 
  • A fraud alert doesn’t stop others from checking your credit, but it tells lenders that you were a victim of credit fraud so they take extra steps to make sure it’s you applying for the credit. 

Bottom Line 

Everyone – student loan borrowers or not, must protect their credit, especially during the pandemic. With heightened credit fraud going on, we all have to do our part to stay safe. If you were a victim of the student loan crisis, it's even more important that you stay on top of your credit, reporting any incorrect information and taking the steps to protect yourself from any fraud or wrongdoing. 

Check your credit reports weekly while you can. The faster you report incorrect information and get to the bottom of the issue, the less damage it can do to your credit scores. In the meantime, keep paying your bills on time, keep your credit balances low, and don’t apply for new credit unless you need it. 

Hope this helps!

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