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What Does It Mean to Default on a Loan?

Dear Experian,

I had student loans in default that have now been consolidated and brought current through another company earlier this year. All student loans are still reporting as derogatory on my credit report. The original loans are from 10 years ago. So, my student loans are reported three times: the originals, when they got sent to the government, and my consolidation. How do I fix this?

– HDS

Dear HDS,

Essentially, to default on loan means that a payment was missed. How quickly an account is considered in default depends on the type of loan. With a federal student loan, your account may not be considered in default until you have missed nine months of payments. Private student loans may consider you to be in default as soon as the first payment is missed.

Why Your Student Loan Debts May Appear on Your Report More Than Once

Your credit report is a history of all your accounts and the payment history on those accounts. Student loans typically appear on the credit report as a separate entry for each enrollment period or semester that you attended school.
If your original student loan accounts are transferred, sold, or consolidated, the original lender will update the account status to show that they have been transferred or closed. However, the history of the accounts will remain on the report, including any delinquencies, which remain for seven years.

If the new lender also reports to Experian, you will see the new account listed as a separate entity on your report, but these are not considered duplicates. Both the previous accounts and the new accounts are part of your credit history.

If your loans change hands a second time, the third company may also report to Experian. Again, the previous lender will update their accounts to show that they are now transferred or closed, but they won’t be removed right away.
Accounts that have never been late remain on the credit report for 10 years from the date they are closed, while closed accounts that show a history of late payments are removed seven years from the original delinquency date.

How Late Payments Affect Your Credit Report

If your loans are now current, your new lender will report them as such. Although the previous late payments may still be appearing, the longer ago they occurred, the less they will affect you.

If you continue to make all your payments on time, your credit scores will begin to improve. In time, the late payments made on your previous accounts will fall off your report, and only your positive account history will remain.

Thanks for asking,
The “Ask Experian” Team

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