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Old 04-01-2012, 09:07 PM
 
128 posts, read 157,552 times
Reputation: 110

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I had multiple student loans from undergrad and professional school. This was back when banks were in the student loan business, and every school I attended (I was an adult student who had to relocate & transfer a few times) used different lenders. So, I ended up with a billion individual student loans. Altogether, my student loan debt was close to $175K. These loans accounted for the vast majority of my debt, with the remainder of my debt being medical/health related.

The loans have been discharged/forgiven due to permanent disability and the Dept. of Education has notified the credit bureaus. I could wait a couple of months to see how my credit score is going to be affected, but the suspense is killing me. So, I'm asking those who know...

From my research I know that the credit bureaus are going to change the status of the loans to "Paid as Agreed" on my reports, but I'm really curious to know how many points can I expect my credit score to raise with $175K in debt, from multiple loans, gone from my credit record?

I've read on this mortgage forum that paying off ONE debt would raise a person's credit score as much as 25-30 points, so I'm really curious to know how many points I could reasonably gain in my score since multiple individual loans were paid off (for all the credit bureaus know, b/c all I think they're told is that the debts were paid).

Also, I've read that real estate agents or brokers (I don't remember which) can use some kind of automated system to re-score a person's credit when debts have been paid and reported to the bureaus but have yet to be reflected in the credit score (because the bureaus only update/re-score periodically). Is this true? If so, my discharge letter says the bureaus have been notified, so how long should I wait to get this done?

I ask that because if my score comes up enough, I want to start the home buying process as I just got my Certificate of Eligibility from the VA. For what I'm paying in rent, I could pay PITI on a nice, but modest, house. Thanks in advance.
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Old 04-05-2012, 07:43 PM
 
Location: Southern New Hampshire
4,321 posts, read 4,381,271 times
Reputation: 8639
I'm curious, the status will change to "Paid as agreed" even when they WEREN'T actually "paid as agreed" (but rather forgiven)?

From what I've read, some credit scores actually go DOWN a few points when something like a car (not a credit card which could just be run up again) is paid off. I have always thought that was insane. I think the reasoning is that you can no longer show that you are paying regularly and therefore handling this debt well (of course you can't show that any more, because you paid it off! I said it was nuts!).

Of course the longer your credit history, the less any one item will help or hurt you.

Sorry, I know this isn't very helpful. Wanted to bump up your post so hopefully others will respond as I don't have much good info. :-)
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Old 04-05-2012, 09:16 PM
 
128 posts, read 157,552 times
Reputation: 110
Quote:
Originally Posted by karen_in_nh_2012 View Post
I'm curious, the status will change to "Paid as agreed" even when they WEREN'T actually "paid as agreed" (but rather forgiven)?

From what I've read, some credit scores actually go DOWN a few points when something like a car (not a credit card which could just be run up again) is paid off. I have always thought that was insane. I think the reasoning is that you can no longer show that you are paying regularly and therefore handling this debt well (of course you can't show that any more, because you paid it off! I said it was nuts!).

Of course the longer your credit history, the less any one item will help or hurt you.

Sorry, I know this isn't very helpful. Wanted to bump up your post so hopefully others will respond as I don't have much good info. :-)
Thanks, Karen. I took another look at my report and the paid off loans actually say "pays as agreed" in one place and "paid, closed" in another. I think the now closed accounts are hurting my credit score because, like you, I read that scores go down when something is paid off. But, I wonder how long it takes for the score to rebound?

The reason the student loans say "pays as agrees" and "paid, closed" is because when student loans are discharged the lenders STILL get their money; they just get repaid by Uncle Sam and not me.
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Old 04-06-2012, 09:23 AM
 
Location: MID ATLANTIC
4,032 posts, read 8,732,468 times
Reputation: 3042
If the student loans are your only recent credit, they won't do jack for your scores. It will just move you from derogatory credit to no credit. We the payments past due? Even paid obligations with a past due history will still negatively impact your score.

It all comes down to what other debt you may have and the kind of debt.

Without knowing more, your question is like asking what the weather will be on September 18, 2012.
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Old 04-06-2012, 01:24 PM
 
128 posts, read 157,552 times
Reputation: 110
Quote:
Originally Posted by SmartMoney View Post
If the student loans are your only recent credit, they won't do jack for your scores. It will just move you from derogatory credit to no credit. We the payments past due? Even paid obligations with a past due history will still negatively impact your score.

It all comes down to what other debt you may have and the kind of debt.

Without knowing more, your question is like asking what the weather will be on September 18, 2012.
No, they are not my only recent credit. I only wanted to get an idea, I wasn't looking for concrete figures, but thanks.
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Old 04-06-2012, 02:11 PM
 
Location: Southern New Hampshire
4,321 posts, read 4,381,271 times
Reputation: 8639
I think the question was pretty reasonable; I just don't know the answer, unfortunately.

As SmartMoney wrote, if they were delinquent before being paid off, that will hurt of course. Hopefully that wasn't the case.

A month or two before you plan to apply for the mortgage, you might want to pay $10 or so for your credit score; at least then you'll have a good idea of what you need to do to qualify for the mortgage (e.g., work on credit for awhile longer before applying for a mortgage).

Good luck!
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Old 04-06-2012, 04:47 PM
 
128 posts, read 157,552 times
Reputation: 110
Quote:
Originally Posted by karen_in_nh_2012 View Post
I think the question was pretty reasonable; I just don't know the answer, unfortunately.

As SmartMoney wrote, if they were delinquent before being paid off, that will hurt of course. Hopefully that wasn't the case.

A month or two before you plan to apply for the mortgage, you might want to pay $10 or so for your credit score; at least then you'll have a good idea of what you need to do to qualify for the mortgage (e.g., work on credit for awhile longer before applying for a mortgage).

Good luck!
I pulled my credit scores last night. I've been reading that lenders use the middle score, and my middle score is okay for some VA home loan lenders. My highest score is my TransUnion score. I wish I could find lenders that used that score, but everything I've read says that the middle score is the one that's used.

Someone who's bought several houses told me they thought lenders averaged the 3 scores and used the average. Have you heard anything like that before?
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Old 04-06-2012, 04:54 PM
 
Location: Two years in Raleigh, NC
6,120 posts, read 5,844,302 times
Reputation: 7727
Ironically, I just read this article about an hour ago. Are you sure IRS isn't going to come back at you for the taxes on those forgiven loans?

Canceled debt may mean big tax bill- MSN Money
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Old 04-06-2012, 04:58 PM
 
128 posts, read 157,552 times
Reputation: 110
Quote:
Originally Posted by Jkgourmet View Post
Ironically, I just read this article about an hour ago. Are you sure IRS isn't going to come back at you for the taxes on those forgiven loans?

Canceled debt may mean big tax bill- MSN Money
No, they won't. That's already been handled. It's called IRS Form 982.
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Old 04-06-2012, 05:05 PM
 
3,352 posts, read 7,492,981 times
Reputation: 1406
Quote:
Originally Posted by smallvictories View Post
I pulled my credit scores last night. I've been reading that lenders use the middle score, and my middle score is okay for some VA home loan lenders. My highest score is my TransUnion score. I wish I could find lenders that used that score, but everything I've read says that the middle score is the one that's used.

Someone who's bought several houses told me they thought lenders averaged the 3 scores and used the average. Have you heard anything like that before?
Always the middle score, never an average.
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