Is paying off defaulted loans that aren’t on my credit report going to help my credit score?
Cris H asked:
I owe $9,000 in student loans. They just started garnishing my wages for $500/month. The loans were from 1998 and do not appear on my credit report. The collection company told me that once they’re paid off that they will appear as not in default on my credit.
I owe $9,000 in student loans. They just started garnishing my wages for $500/month. The loans were from 1998 and do not appear on my credit report. The collection company told me that once they’re paid off that they will appear as not in default on my credit.
Tags: Defaulted Loans, Student Loans, Wages
September 12th, 2009 at 8:24 am
First of all, don’t believe anything a collection agency tells you. Always get it in writing, and know your rights.
Even though the loans do not appear on your credit report now, they could begin appearing once you start making payments. If the collection agency is a subscriber, they are probably going to report your payment history to the credit bureaus. That is going to hurt your credit score.
But these are your loans, so it is your financial and moral responsibility to pay them off. Eventually, they will roll off your credit history but it could be seven years. In the meantime, you can improve your credit score by paying all your other bills on time and keeping any credit card balances below 30% of your credit limit.
You are in default now, but once the loans are paid off, they will be satisfied obligations.
September 13th, 2009 at 9:58 am
If you don;t pay them off, eventually they would be on your credit report and not in a good way- so if you pay them off and they show as being NOT in default, I guess that’s a good thing
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