Jeramiah Harrington struggled for nearly a year to drive his credit score up from a grim 527 to pretty good 682. Then in a matter of days, his score unexpectedly tumbled by 91 points in May.
What's worse: He apparently didn't do anything wrong to drive that score back below 600. He simply was caught in a COVID-19-related glitch connected to some student loans.
"I had never even been close to 700," said Harrington, 38, who lives in Flint Township, Michigan.
Harrington, who works as a cartographer at a civil engineering company, wondered just how long it would take to see his score regain lost ground. But the good news is that a fix apparently may be in the works, as he saw his score go up somewhat as of June 7.
Nearly 5 million student loan borrowers were harmed by an unusual mistake that was triggered after new rules offered debt relief during the COVID-19 crisis, according to consumer watchdogs.
Student loan servicer Great Lakes Education Loan Services allegedly mishandled reporting the student loan status and provided inaccurate information about millions of student loan borrowers to Equifax, TransUnion and Experian – which reported that wrong information to third parties, such as Credit Karma, advocates for borrowers say.
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The nonprofit Student Borrower Protection Center helped to bring about a class-action complaint filed in California on behalf of the borrowers against Great Lakes, a subsidiary of Nelnet; the credit reporting agencies, and VantageScore.
The major reporting bureaus own VantageScore Solutions, a credit score model, and VantageScore allegedly treated the inaccurate information in a way that hurt the credit scores of many consumers.
Jeff Richardson, vice president for marketing and communications for VantageScore Solutions, said the company would not comment due to ongoing litigation.
Nelnet spokesperson Ben Kiser apologized for the inconvenience, saying Great Lakes remains committed to resolving the issue promptly.
Great Lakes, Kiser said in an email, reported information relating to repayment borrowers May 6 to the credit reporting agencies in a way it believed would not have a negative impact on credit scores. But by May 11, some consumers began raising concerns about their falling credit scores.
"Immediately, Great Lakes began researching these borrower accounts and determined there was an inconsistency between Great Lakes reporting and that of other student loan servicers," he said.
"Instead of reporting borrowers as current with monthly payments of $0, Great Lakes reported borrowers as current with deferred monthly payments of $0," he said.
Great Lakes acknowledged the inconsistent coding and let borrowers know adjustments would be made in the reporting.
"An updated credit file was provided to the credit reporting agencies on May 15," Kiser said, "and all four reporting agencies have processed the file. Our priority is providing an exceptional customer experience. When we fall short of our goal, our focus is to communicate openly and resolve the issue as soon as possible."
What should student loan borrowers expect?
The Coronavirus Aid, Relief, and Economic Security Act states that borrowers aren't supposed to be charged a dime in interest and automatically will see the interest rate on most federal student loans drop to 0% from March 13 through Sept. 30. Federal student and parent loans must be held by the U.S. Department of Education to be eligible.
But each month was to be treated in the credit reporting process as if a loan payment was made.
Yet some student loan borrowers began discovering dramatic drops in their credit scores in May.
For consumers, it's yet another headache associated with lost jobs, fewer paid hours and other financial challenges related to the COVID-19 crisis.
Harrington already faces enough hurdles. He has more than $150,000 in student loan debt after attending college for several years and ultimately receiving a bachelor's degree in Outdoor Recreation Leadership and Management from Northern Michigan University in 2014 and a master's degree in 2016 in Integrated Geospatial Technologies from Michigan Technological University in the state's Upper Peninsula.
He also completed a graduate certificate program through Central Michigan University Global Campus online to receive a college teaching certificate. Five years ago, he was diagnosed with multiple sclerosis and decided that some background in education would be good in case his symptoms ever prompted him to seek a career change.
"I could always teach online from home," he said.
Debt relief was welcome this spring but the credit scoring mix-up came at a time when he was working hard to rebuild his score. Harrington had been regularly monitoring his credit score via Credit Karma after struggling in the past to keep up on bills.
He had been in a car accident a few years ago, unexpectedly had to buy a car and then his score dropped even further when he took out the new car loan, as he juggled student loan debt and medical bills.
To get things on track, he diligently made sure to make all his payments on time and pay more than the minimum due.
Yet, he's now hopeful, some fixes will take place sooner rather than later.
On Monday, Harrington said that according to Credit Karma his TransUnion score increased 85 points as of June 7.
"So most of that 91 point drop has been recovered," Harrington said. "The Equifax has gone up only 2 points and sits at 590 for now."
All credit scores didn't plunge
Another plus: Not everyone experienced a shocking drop in their credit scores.
Chi Chi Wu, staff attorney at the National Consumer Law Center, said the Great Lakes accounts were wrongly marked as "deferred," which influenced the drop in the VantageScores used by Credit Karma.
But Wu said the mistake did not lead to a drop in FICO scores so someone who was seeking a loan might have been OK if the lender was using the FICO score, as most do. FICO does not consider deferments in its score.
Before you apply for a loan or mortgage, it may be wise to ask what kind of scoring model the lender will use.
You'd also want to see how lenders are reporting your payments – and how any agreements reached to postpone paying on mortgages or car loans show up on your credit reports.
"People who are having economic hardship during COVID-19 should be checking their credit report regularly," Wu said.
Wu noted that some consumers have reported that their credit reports were wrongly marked as "in forbearance," when they simply inquired about a COVID-19-related mortgage forbearance, which also lowered their VantageScore. VantageScore said on May 15 that it will adjust its scoring model to "minimize the potential of any negative impact associated uniquely with the usage of forbearance and deferment codes."
Free credit reports more readily available
Free credit reports are now available every week through April 2021 in recognition of the financial struggles people may be facing as a result of the economic shutdowns used to fight the pandemic.
You'd go to AnnualCreditReport.com. Typically, you can request one free credit report from each of the three major bureaus – Equifax, TransUnion and Experian – each year. But now you have access more frequently if you need it.
Keeping a careful watch on your credit report for the next year is essential as people may face financial difficulties, including needing to seek relief through special forbearance programs.
You may see something called a "natural disaster" code on your account. It's important to note that, VantageScore stated: "When accounts are reported with a natural disaster reporting code, information that would normally have a negative impact on a consumer’s credit history is instead 'set to neutral' and thus is not included when calculating the consumer’s credit score. Positive information already in the file, such as the account’s positive payment history, is retained."
You shouldn't see a ding on your credit report if you weren't late in the past and now a lender agrees to postpone payments on your auto loan or credit card debt or mortgage as part of COVID-19 relief.
Borrowers need to request many types of relief typically, unlike the automatic provisions relating to federal student loans. You don't want to be late on your payments first – which will hurt your credit score.
Remember, too, that scammers are taking advantage of the economic chaos and confusion that surrounds the pandemic. As a result, consumers could need to check their credit reports more frequently to spot any signs of fraud.
This article originally appeared on Detroit Free Press: Great Lakes Education Loan Service glitch hurts credit scores