The Student Loan View from the Credit Report Cycle Presenters

Agenda Credit reports and scores from the student loan view The role of credit in personal finance Credit terms and reporting Impact of student loans on reports and scores Strategies for educating borrowers Helpful resources

The Role of Credit in Personal Finance

Credit is an Obligation Help students understand their obligations and options as a borrower Credit is a contract that allows for purchases and services now but pay later with interest

Good Credit Behavior is Rewarded Good credit enables students to: – Qualify for Grad PLUS, private, or other consumer loans – Receive lower interest rates and fees – Receive lower insurance rates – Buy a home or rent an apartment – Secure employment – Avoid cash deposit requirements

Review of Credit Terms and Reporting

Credit Reporting Agencies Collect and store the credit records of millions of individuals Provide credit reports to paid subscribers and consumers Work together to develop, maintain, and enhance an industry-standard reporting format

745 Anton Blvd. Costa Mesa, CA (888) P.O. Box Atlanta, GA (800) P.O. Box 1000 Chester, PA (800) Major Credit Reporting Agencies 250 East Broad St. Columbus, CA (800)

Federal Student Loan Reporting Servicer must report loan information to the three national CRAs within 90 days of each disbursement – Reported at the account level, not loan level

Federal Student Loan Reporting HEA strongly encourages servicers to wait until the borrower is at least 60 days delinquent to report to the CRAs The “clock” for a 30-day delinquency starts 30 days after the due date

Credit Report Credit report summarizes an individual’s financial history Used by creditors to predict risk Applicant is responsible with personal finances Applicant is able to handle additional credit

What the Credit Report Says About a Borrower Which types of credit they use Whether they pay their bills on time How much they owe How much credit they have available

Information Found on the Credit Report Personal Information Name, address, birth date, and employer Account Information Date opened, credit limit, balance, monthly payment Public Record Information Bankruptcies, judgments, wages garnishments

Information Found on the Credit Report Inquiries Your own, from lenders, from employers landlords, etc. Statements of Dispute Any disputes a person has filed regarding data found on their credit report

How Long Negative Information Remains on a Credit Report Delinquencies 7 years Bankruptcies 7 years for complete Chapter 13 bankruptcies 10 years for Chapter 7 bankruptcies Foreclosures 7 years

How Long Negative Information Remains on a Credit Report Defaulted Loans 7 years from the date the loan was 30 days delinquent Collections 7 years, depending on the age of the debt being collected Public Records 7 years

Credit Reports from the Student Loan View

In-School Status Great Lakes/U.S. Dept of Education Address: 2401 International Ln Madison, WI xxx-xxxx Account Number: Address Identification Number: Status: Open/In good standing Date Opened: 09/2009 Account Type: Installment Type of Loan: Education Date Reported: 09/2010 Term/Duration:Credit Limit: $0 Monthly Payment:Terms Frequency: Deferred Highest Credit/Original Loan Amount: $22,000 Date of Last Payment:Responsibility: Individual Balance: $22,000

Repayment Status Great Lakes/U.S. Dept of Education Address: 2401 International Ln Madison, WI xxx-xxxx Account Number: Address Identification Number: Status: Open/In good standing Date Opened: 09/2009 Account Type: Installment Type of Loan: Education Date Reported: 03/2014 Term/Duration:Credit Limit $0 Monthly Payment: $275 Terms Frequency: Monthly Highest Credit/Original Loan Amount: $22,000 Date of Last Payment: 03/2014 Responsibility: Individual Balance: $20,459

Income-Based Repayment Status Great Lakes/U.S. Dept of Education Address: 2401 International Ln Madison, WI xxx-xxxx Account Number: Address Identification Number: Status: Open/In good standing Date Opened: 09/2009 Account Type: Education Type of Loan: Installment Date Reported: 03/2014 Term/Duration:Credit Limit: $0 Monthly Payment:Terms Frequency: Monthly Highest Credit/Original Loan Amount: $22,000 Date of Last Payment: 03/2014 Responsibility: Individual Balance: $20,459

Delinquent Loan Status Great Lakes/U.S. Dept of Education Address: 2401 International Ln Madison, WI xxx-xxxx Account Number: Address Identification Number: Status: Account past due 90 days Date Opened: 09/2009 Account Type: Installment Type of Loan: Education Date Reported: 03/2014 Term/Duration:Credit Limit $0 Monthly Payment: $275 Terms Frequency: Monthly Highest Credit/Original Loan Amount: $22,000 Date of Last Payment: 12/2013 Responsibility: Individual Balance: $20,459

Deferment/Forbearance Status Great Lakes/U.S. Dept of Education Address: 2401 International Ln Madison, WI xxx-xxxx Account Number: Address Identification Number: Status: Open/Deferred until 10/2014 Date Opened: 09/2009 Account Type: Installment Type of Loan: Education Date Reported: 03/2014 Term/Duration:Credit Limit $0 Monthly Payment:Terms Frequency: Deferred Highest Credit/Original Loan Amount: $22,000 Date of Last Payment: 9/2013 Responsibility: Individual Balance: $20,459

Paid-in-Full Status Great Lakes/U.S. Dept of Education Address: 2401 International Ln Madison, WI xxx-xxxx Account Number: Address Identification Number: Status: Closed/paid/zero balance Date Opened: 09/2000 Account Type: Installment Type of Loan: Education Date Reported: 03/2014 Term/Duration:Credit Limit $0 Monthly Payment:Terms Frequency: Monthly Highest Credit/Original Loan Amount: $22,000 Date of Last Payment: 01/2014 Responsibility: Individual Balance: $0

Consolidated Loan Status Great Lakes/U.S. Dept of Education Address: 2401 International Ln Madison, WI xxx-xxxx Account Number: Address Identification Number: Status: Closed/transferred Date Opened: 09/2008 Account Type: Installment Type of Loan: Education Date Reported: 06/2012 Term/Duration:Credit Limit $0 Monthly Payment:Terms Frequency: Monthly Highest Credit/Original Loan Amount: $22,000 Date of Last Payment: 03/2012 Responsibility: Individual Balance: $20,459

Default Status Great Lakes/U.S. Dept of Education Address: 2401 International Ln Madison, WI xxx-xxxx Account Number: Address Identification Number: Status: Claim filed with federal government Date Opened: 09/2006 Account Type: Installment Type of Loan: Education Date Reported: 03/2014 Term/Duration:Credit Limit $0 Monthly Payment: $0 Terms Frequency:Highest Credit/Original Loan Amount: $22,000 Date of Last Payment: 06/2012 Responsibility: Individual Balance: $0

Rehabilitated Loan Loan(s) will no longer be considered to be in a default status The default status reported by loan holder will be deleted from credit report History of delinquencies will remain on credit report

Old Loan After Rehabilitation Great Lakes/U.S. Dept of Education Address: 2401 International Ln Madison, WI xxx-xxxx Account Number: Address Identification Number: Status: Transferred Date Opened: 1/2007 Account Type: Installment Type of Loan: Education Date Reported: 03/2014 Term/Duration:Credit Limit $0 Monthly Payment: $424 Terms Frequency: Monthly Highest Credit/Original Loan Amount: $25,640 Date of Last Payment: 03/2014 Responsibility: Individual Balance: $25,459

Old Loan After Rehabilitated Great Lakes/U.S. Dept of Education Payment history: 2011JanFebMarAprMayJunJulAugSepOctNovDec Status JanFebMarAprMayJunJulAugSepOctNovDec Status120OK 3060OK JanFebMarAprMayJunJulAugSepOctNovDec Status

New Loan After Rehabilitation Great Lakes/U.S. Dept of Education Address: 2401 International Ln Madison, WI xxx-xxxx Account Number: Address Identification Number: Status: Open/In good standing Date Opened: 1/2014 Account Type: Installment Type of Loan: Education Date Reported: 03/2014 Term/Duration:Credit Limit $0 Monthly Payment: $355 Terms Frequency: Monthly Highest Credit/Original Loan Amount: $25,640 Date of Last Payment: 03/2014 Responsibility: Individual Balance: $25,459

Credit Scores from the Student Loan View

Credit Score A number that predicts the likelihood of repaying debts on time Based on a mathematical equation that evaluates many types of information in the credit report FICO is most commonly used model

Factors That Make up a Credit Score Source: myfico.com Payment History Number of days delinquent Time since last delinquency Number of delinquent accounts

Factors That Make up a Credit Score Student Loan Impact Late payments could drop the score by as much points Source: myfico.com

Factors That Make up a Credit Score Amounts Owed Total amount owed compared to original loan amount on installment accounts Debt-to-credit ratio is calculated Source: myfico.com

Factors That Make up a Credit Score Student Loan Impact Student loan amounts are included in overall debt balances Source: myfico.com

Factors That Make up a Credit Score Length of Your Credit History The amount of time since credit accounts have been opened Source: myfico.com

Factors That Make up a Credit Score Student Loan Impact Staying in good standing will improve their score over time Source: myfico.com

Factors That Make up a Credit Score New Credit The number and time since recent inquiries for new credit Source: myfico.com

Factors That Make up a Credit Score Student Loan Impact Source: myfico.com No impact from Direct Subsidized and Unsubsidized applications Parent/Grad PLUS application will count as a hard inquiry and may lower the score slightly

Factors That Make up a Credit Score Types of Credit Used Looks at the mix of credit types in your credit file Source: myfico.com

Factors That Make up a Credit Score Student Loan Impact Student loans are a form of installment credit Source: myfico.com

Impact of Student Loans on Credit Reports and Scores

Impact During In-School Period Loan Application Credit Report Credit Score Direct Sub and Unsub loans (no credit review required) PLUS loans (credit review required, will show as an inquiry) Private loans (credit review required, will show as an inquiry)

Impact During In-School Period Disbursement Credit Report Credit Score Federal Student loans (reported within 90 days) Private Student Loans (varies by lender)

Impact During Post-Enrollment Period Repayment Credit Report Credit Score On-time payments Delinquent payments Deferment/Forbearance

Strategies for Educating Borrowers

Encourage Student Loan Borrowers Understand their obligations as a borrower – Utilize NSLDS to keep track of the federal student loans

Encourage Student Loan Borrowers Become familiar with the information in their credit reports – Consumers are entitled to one free credit report per credit bureau in a 12-month period – Official site annualcreditreport.com annualcreditreport.com

Encourage Student Loan Borrowers Choose an affordable payment plan Change their plan if the one they have is not affordable Make payments on time Set up auto-debit

Encourage Student Loan Borrowers Contact the servicer immediately – Difficulties making a payment – Change payment due date – Change payment plans Catch up on missed payments if they become delinquent

Helpful Resources

Resources Annualcreditreport.com or (877) Myfico.com Bankrate.com Optoutprescreen.com

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