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Charged Off Student Loan....Strategy for good credit .... Please Help

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Hello everyone,

 

I have a multitude of questions that I need advice for.  A couple of years back, around 2010 I had a couple of student loans that went into chargoff,  I was able to have 2 of them in rehabilitation and are no longer affecting my credit.   

 

One of them however, has charged off, it is pretty high around 17000 dollars, however I have been paying them monthly over the course of 5 or 6 years.  What I do not understand is why, even though I am making payments every month, they report it to the credit agencies as a charge off.   

 

I've offered them money to just take it off my credit score, I've offered to settle, I've offered to consolidate the loan, I've offered them to settle the loan by taking another loan out.  Their reasoning for this is that since it is charged off that they will keep notifying the credit agencies of that even though I am making payments.

 

First Question:

 

1) Do these people have to report it as charged off even though I have been making payments for 6 years.  It seems like a bully tactic to me in order to pay it in full.  I don't see why they can't put me into some sort of rehabilitation like my other loans have to wipe it off my credit history

 

 

2) why is it that they cannot just not report anything, is this normal behavior? When speaking to other agencies it seems like a charge off is usually only reported when payments are no longer being made.

 

 

3) They have asked me to settle for 7000 however I did not have the money at the time.   I was thinking of taking out a personal loan in order to settle this issue just to clean it out.  Will this effect my credit score in any way?

 

4)  If they do agree to settle, if I get the money, would they be able to remove the bad credit history from my credit report?   I've heard different ways to go about doing this, one would be to deal with the issue and once they have the money dispute it with the credit agencies and they are likely to contact the collector, and USUALLY will not report back.   Is this at all true, is this the way it works?  What are my chances in succeeding with this?  Is there any way to show that I have made good due on my payments since it was charged off, it just seems so odd to me that I get punished every month for actually making payments to these people?

 

 

5) if so to question 4, who do I contact to dispute something negative on my credit report, do I have to call each one individually?

 

 

6) What are the best ways to have them remove it from my credit score before settling, I would think there are certain things that could be done, considering I have leverage in finally paying them their money?

  

7) If I would want to get another loan in order to settle, where is the best place to do that?

 

I have been trying to take advantage of some real good credit card rewards deals, and none of them will give me the card because of this.

 

8) Are there any ways of talking to these credit card agencies to approve these credit cards,  I have been making payments for many years and haven't been a delinquent since.  What are some strategies in order to do this

 

9)  I am looking to buy a house soon.  I've spoken to my loan officer and he said because of my high credit score I shouldn't have a problem purchasing a house on a loan.  Is this true?  it seems odd to me that a I wouldn't get a credit card, but would get a loan for a house.

 

10) My credit score from Trans Union showed up as 810,  so what I don't get is why this is so high if I'm considered a delinquent?  Does my credit score seem too high? Maybe I got it from a lying website or something?  I still have all info from it?  Should I be getting my other scores from experian and equifax,  will doing so affect my credit score?

 

 

I know this is a lot but it seems like theres no where else I can find answers to this.  Any help would be greatly appreciated

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too many questions to answer all at once.

 

Are you paying the people who gave you the loan, or some collection agency?  Seems strange they would settle a student loan for less.  If its the original lender, borrowing the money to settle is a good idea.  Get it in writing before you send money stating "settled in full".

 

The only TRUE credit scores come from myFICO.com ... anything else is suspect.

 

In general...student loans have little effect on credit worthiness...everybody has them and as long as payments are being made, you're good.

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too many questions to answer all at once.

 

Are you paying the people who gave you the loan, or some collection agency?  Seems strange they would settle a student loan for less.  If its the original lender, borrowing the money to settle is a good idea.  Get it in writing before you send money stating "settled in full".

 

The only TRUE credit scores come from myFICO.com ... anything else is suspect.

 

In general...student loans have little effect on credit worthiness...everybody has them and as long as payments are being made, you're good.

 

The loan was with one bank, as soon as it defaulted and charged off another bank took the responsibility for getting the  payments.  So yes, Im technically paying the people who took over the loan.  

 

Even though you say it doesn't effect credit worthiness, I have to say nay to that.  I am not able to get a n amazon prime card, or any really good credit card AMEX gold has sent me many offers but as soon as I apply they see the CO and automatically deny me. I've tried city bank thank you card and have also been denied.  They do effect your credit.   

 

Will I be able to get the CO off of my credit score once settling?  Are they allowed to do that?  Whats the best way of getting that off?

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CO is both a "status" and an "event".  Once you're  60-90 days late, the CO event happens (the creditor takes a charge against accrued income for P&L  purposes).  From then on, the report CO status to the CRAs on a monthly basis.  If you ever bring the account current, the monthly status should change...but...it won't change the history.

 

I suggest you go to annualcreditreport.com and get copies of your actual, up-to-date, and accurate credit reports...and myFICO.com to get your actual credit scores.  I suspect there might be something other than student loans affecting your ability to get a credit card.

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I have gotten my report twice this year,  the only negative thing on the credit score is this CO.   Why do I have to pay the debt in full for it to be thought of as covered?  Why if Im making paynets do they have to report me.

 

I can get credit cards its just a problem with the great rewards credit cards that are giving me an issue.  AMEX GOLD and Citi Bank Thank You premier.

 

My transUnnion credit score is 810.   Will my credit go down if I ask for the others from experian or equifax?   Will myfico.com give me credit scores from all three?

 

Also, my biggest concern is how best to remove it from my credit and negotiate terms with them once I settle?

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If your ACTUAL FICO transunion score is 810, you should have no problems getting a premium credit card.

 

There are lots of misleading sources for credit related data.  Unless you get your credit scores directly from FICO, they're either FAKO or out of date.

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If your ACTUAL FICO transunion score is 810, you should have no problems getting a premium credit card.

 

There are lots of misleading sources for credit related data.  Unless you get your credit scores directly from FICO, they're either FAKO or out of date.

 

 

So before I do anything with the above, should I get my real credit scores from FICO?  

 

Honestly, my biggest concerns are what were outlined in the first post, I understand if everything can't be answered, however, dealing with this student loan is my utmost priority!

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If...big IF...you are absolutely sure you're dealing with a legitimate bank who is legitimately the servicer of your student loan (as opposed to some bottom feeding collection agency), then borrowing $7000 to pay them off may be a good idea.  Make sure you get their offer in writing BEFORE you send money, and make sure it says SETTLED IN FULL and that they won't sell the balance.  You can ask for a "pay for delete", but they might not do that.  However, once its marked "paid in full", a history of COs will hurt less and less as time goes by.

 

It does seem a little strange to me that they would be willing to settle for less than the full amount...so, what is your outstanding balance? 

 

A credit union would be a good place to borrow the money...you'll probably have to move your checking there to qualify.

 

Yes, pay for your actual, current credit scores from myfico.com.  Realize that the scores you get will be the "FICO consumer scores"...these are likely to be different than your FICO mortgage scores. 

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If...big IF...you are absolutely sure you're dealing with a legitimate bank who is legitimately the servicer of your student loan (as opposed to some bottom feeding collection agency), then borrowing $7000 to pay them off may be a good idea.  Make sure you get their offer in writing BEFORE you send money, and make sure it says SETTLED IN FULL and that they won't sell the balance.  You can ask for a "pay for delete", but they might not do that.  However, once its marked "paid in full", a history of COs will hurt less and less as time goes by.

 

It does seem a little strange to me that they would be willing to settle for less than the full amount...so, what is your outstanding balance? 

 

A credit union would be a good place to borrow the money...you'll probably have to move your checking there to qualify.

 

Yes, pay for your actual, current credit scores from myfico.com.  Realize that the scores you get will be the "FICO consumer scores"...these are likely to be different than your FICO mortgage scores. 

 

 

Thank you so much for your helpful information, this really means a lot to me.  I'm going to be getting my credit scores from myfico and posting them soon. I had some other questions and would be grateful if you helped me out some more:

 

The total for my loan is 16,800 dollars.  What does it mean exactly that they won't sell the balance? 

 

Would they say that it was "paid in full" if it was settled at a much lower cost?

 

When I ask for this stuff in writing, what exactly will they be sending me? E-mail, paper-work?

 

Reading up on pay for delete seems like its difficult to do?  How should I go about asking for this?

 

Is it possible to get my mortgage credit score?   Will settling lower my credit score as well as consistently asking for my credit score?

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outstanding balance of 16,800...and they'll settle for 7k...sounds suspicious...was this a government backed loan?

 

"Paid in full" or "Settled in full"...you want words that say that as far as they are concerned, the debt is over and done with.  You can ask for PFD when you talk to them on the phone and ask for the offer in writing.

 

If it is a collector (or a junk debt buyer), they may take your 7k and then sell the balance to another junk debt buyer.  You want words that say they won't do that.

 

The best "proof" that they agree is a signed letter on their letterhead.  an email might also be okay.

 

The only way to see your FICO mortgage scores is from a mortgage lender after you apply.

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outstanding balance of 16,800...and they'll settle for 7k...sounds suspicious...was this a government backed loan?

 

"Paid in full" or "Settled in full"...you want words that say that as far as they are concerned, the debt is over and done with.  You can ask for PFD when you talk to them on the phone and ask for the offer in writing.

 

If it is a collector (or a junk debt buyer), they may take your 7k and then sell the balance to another junk debt buyer.  You want words that say they won't do that.

 

The best "proof" that they agree is a signed letter on their letterhead.  an email might also be okay.

 

The only way to see your FICO mortgage scores is from a mortgage lender after you apply.

 

 

 

I'm pretty sure its not government related loan.  Keybank is the name of the lender that bought the loan.  It is private it seems.  However, I do know that all these loans were guaranteed by the government which is probably what got us in this mess to begin with, I don't think kids should be granted this type of money and then be punished for it later on.  Like I havent' done full research but from my knowledge the govnt had laws in place that dissallowed banks to refuse loans.  Is this at all true, it could be that the government will help with the rest.  What makes you suspicious its not a private bank?

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Here's some interesting reading... http://ficoforums.myfico.com/t5/Student-Loans/KeyBank-Private-Education-Loan-Charge-Offs/td-p/682557

Note the post about keybank "accepting" a settlement and the reporting it as a partial payment...

Sounds like they are a bona fide lender, but still are full of tricks...

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Thanks again, its really crazy what they are doing.  I don't understand this bullish strategy.  I'm lucky that my loans weren't so high.  How do these people expect you to actually pay the loan in full.  Im sure they buy these loans from people at a lower rate and use the charge off to settle higher than what they paid for it.  It seems absolutely sick to me they don't have a rehabilitation process.

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Here's some interesting reading... http://ficoforums.myfico.com/t5/Student-Loans/KeyBank-Private-Education-Loan-Charge-Offs/td-p/682557

Note the post about keybank "accepting" a settlement and the reporting it as a partial payment...

Sounds like they are a bona fide lender, but still are full of tricks...

 

Hey I actually got the settlement for 6,900.  However and I was unaware of this, that they said I would have to pay taxes on the difference (almost 10k).  I did my research and seems like the government sees this as income and they tax you.  I honestly think thins is crazy.  Is there any possible way t get out of paying these taxes?  There is some serious argument for the government being at fault for forcing these banks to approve these loans.   

 

This loan is really frustrating things for me.  Is there any way around this?  

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How do these people expect you to actually pay the loan in full. 

 

You don't borrow more than you can realistically earn and pay back.  PERIOD.  I used Federal loans for my education and got a solid respectable 4 year degree for just under 25k total.  My payment is $279 a month.  

 

These loans are not affordable because far too many high school graduates/students want to attend their "dream" school at a tuition of $30-50k per semester which federal loans won't finance at a private school.  While going to your dream school is great, many many state schools will give the same or better education at a fraction of the cost of that private elite name school.  Add to that many students major in music therapy with a minor in Elizabethan poetry and then wonder why they can't pay back over $100k in loans on a career that pays $35k per year.  Students should seriously do the math on what their long term earning potential is BEFORE they take out thousands of dollars in loans for their education not after they did it and now can not pay it back.

 

Im sure they buy these loans from people at a lower rate and use the charge off to settle higher than what they paid for it.  

 

Of course they do.  This isn't rocket science or some amazing new discovery.  The junk debt buyer business model is to purchase bad debt at a fraction of the cost knowing they have the legal right to collect on the balance that is due not what they paid for the debt.  If they collect even $50 more than what they paid for the debt they made a profit.  It is their business model.  Nothing new or surprising about it.

 

It seems absolutely sick to me they don't have a rehabilitation process.

 

Federal loans DO have a rehab process.  Private creditors are not required to have one.  A private student loan is a credit transaction like any other loan or credit card.  Once you default they can rehab the loan but are not required to.

 

Hey I actually got the settlement for 6,900.  However and I was unaware of this, that they said I would have to pay taxes on the difference (almost 10k).  I did my research and seems like the government sees this as income and they tax you.  I honestly think thins is crazy.  Is there any possible way t get out of paying these taxes?  There is some serious argument for the government being at fault for forcing these banks to approve these loans.   

 

This loan is really frustrating things for me.  Is there any way around this?  

 

It isn't crazy.  It is a debt you didn't pay and therefore the goods/services you received but did not pay back is income to you as something of value.  While 1099c are not always issued when the amount is large they sure are.  This also isn't new either. The IRS has always required the 1099c on forgiven debt to the consumer.

 

If you meet the IRS criteria for insolvency you do not have to pay the taxes.  However, this is IRS tax criteria NOT what the consumer believes they can or cannot afford.  Go to www.irs.gov and you can search for the specific form to file if you qualify to claim insolvency on the amount forgiven.  You may also need to file an amended tax return for that year as well.

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You don't borrow more than you can realistically earn and pay back.  PERIOD.  I used Federal loans for my education and got a solid respectable 4 year degree for just under 25k total.  My payment is $279 a month.  

 

T.....

 

Thanks for the answers.  My loan was not a lot of money and I switched schools after the first year because my scholarship didn't grant me enough for me to want to pay the price tag.

 

That being said, Im able to pay the bill.  What I don't understand is why they wouldn't want to put you through rehabilitation and get their money from you.  It seems criminal for them to have a hold on you to have to pay in full. What would happen to people in the link provided in previous post by Willingtocope above of people who owe a hundred k or more.  It seems odd to me that once you start paying the loan back that the bank has a right to destroy your life for the next 6 years.    They are basically forcing you to pay in full or settle for a large sum, which isn't what these people are signing up for, regardless of the fine print.   The point I was trying to make was "how do these people except you to pay in full"  I know what I signed up for, I know that the answer to that question is "they don't expect you to".    Nobody knows what they are going to make out of college or even if there will be work.  I allotted very little in respect to what the majority of people are asking for in school.  It just seems like a scam to me in my opinion.  The bank would actually get all their money and I'de be willing to pay all of it "over time", so why would they do this in the first place.

 

On the part of the loan, Im not sure how the government considers the difference income?  I am looking to fight this with the IRS. This is illogical.  I took money from someone else to use it to pay for something else, which was already paid for, so this is not money I ever physically had or will have.  The school got their money either way, so this "extra money" where is it?  I don't have it, the bank doesn't have it, the school has it,  it was never income.   Your taxing me on money that doesn't exist.  The government also guaranteed these loans, which increased the cost of school to begin with.  

 

Down to the final question, How much will I be taxed on the remaining 10k?  I make about 90k a year and am probably in the worst tax bracket.  At what rate do they charge your for this "income" that they say you owe.   Would it be the rate of when the money was used?  or the rate now?   It seems odd that they can tax it at my current rate of income as this was the so called "income" I had while in school, where I basically made no money.   

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 What I don't understand is why they wouldn't want to put you through rehabilitation and get their money from you.  It seems criminal for them to have a hold on you to have to pay in full. What would happen to people in the link provided in previous post by Willingtocope above of people who owe a hundred k or more.  It seems odd to me that once you start paying the loan back that the bank has a right to destroy your life for the next 6 years.    They are basically forcing you to pay in full or settle for a large sum, which isn't what these people are signing up for, regardless of the fine print.   The point I was trying to make was "how do these people except you to pay in full"  I know what I signed up for, I know that the answer to that question is "they don't expect you to".    Nobody knows what they are going to make out of college or even if there will be work.  I allotted very little in respect to what the majority of people are asking for in school.  It just seems like a scam to me in my opinion.  The bank would actually get all their money and I'de be willing to pay all of it "over time", so why would they do this in the first place.

 

Their reluctance to do a rehab program is likely based on the known statistics that once a consumer defaults the odds of them staying with a rehab payment plan are very small.  It isn't criminal for them to expect you to pay back the total amount you committed to.  No one forces students to borrow that money.  They CHOOSE to.

 

It isn't odd that a loan/credit contract has an acceleration clause.  This is a standard clause of these contracts and is nothing new.  The one time a lender will do rehab is on a mortgage or auto loan because there is a collateral that they can still come seize if the consumer defaults again.  Again, it is the statistics that show once a consumer defaults the odds on them paying up are slim to none hence the acceleration clause that says when you default the entire amount immediately becomes due.

 

While no one can be guaranteed employment upon completing college, if you know you are going to medical school then your income is likely to be six figures once you complete training.  Major in modern dance and not so much.  There are a multitude of sources on the internet and other places that tell you what the lifetime earning potential is for a particular field of endeavor.  While it is great to want to be a music therapist, if your earning potential is limited due to a lower salary then attending Harvard at great expense to get the degree is extremely foolish.  

 

Last:  many students don't just borrow tuition.  They finance a lifestyle which comes back to bite them when the bill comes due.  One need not attend an expensive private school with outrageous tuition in order to get an education to create a path to a solid work future.  Financing it on private loans is down right insane.

 

As for how they tax you i would call an accountant.  That one is beyond our level of experience. 

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