Latest news with #creditscore
Yahoo
a day ago
- Business
- Yahoo
Credit scores will drop for more student loan borrowers, data shows
Imagine your credit score suddenly dropping by 63 points. For more than four million federal student loan borrowers, that's no nightmare. It's a wake-up call. In fact, a 63-point drop was just the average. Many of these borrowers experiencing a serious delinquency — at least 90 days late on a payment — in early 2025 saw their credit score drop by 42 to 175 points, according to a May analysis by the credit bureau TransUnion. And no one is immune. Borrowers with strong credit histories and cleaner credit reports saw their scores drop the most, by up to three figures. Even scarier? These borrowers could soon have more company. Some of the nearly eight million enrolled in the decaying SAVE Plan may soon face delinquency. So too could borrowers who have been struggling to enroll in income-driven repayment (IDR) plans. 'We're just waiting for them to be reported — we're calling those the shadow delinquencies,' says Michele Raneri, TransUnion vice president of financial services research and consulting. Yes, more than one in every five federal student loan borrowers in active repayment — 20.5 percent of about 19.6 million individuals — are three months or more late on their monthly dues. That's an all-time high, according to TransUnion, in part because Raneri says her team filtered out millions of federal loan borrowers who don't have an active payment due date. According to the Department of Education's own figures, that means more than five million borrowers are in default (270 or more days tardy), and as many as 10 million could be this summer. Being in default hits your credit, but it can also mean wage garnishment and forfeiture of federal tax refunds and Social Security benefits, among other consequences. 'So everything indicates that [this] is just the first group' to be reported, Raneri says. Related: We're facing a student loan default crisis. This academic research might help As mentioned, 20.5 percent of borrowers are 90 or more days delinquent (as of February 2025), but that figure pales in comparison to the 11.5 percent who were similarly tardy five years ago. Secretary of Education Linda McMahon places the blame squarely on colleges and universities, but the COVID-19 pandemic-inspired repayment pause and the last half-decade's fallout undoubtedly play a role, student loan payments are paused, borrowers saw their credit scores increase by an average of 74 points, thanks to the pause, according to the New York Federal Education Department announces 'Fresh Start,' removing the default status on credit reports for about 7.5 million defaulted Education Department calls for the resumption of monthly loan servicers begin reporting 90-days-or-more delinquencies to the credit Education Department resumes debt collection for federal loan defaults. In case you'd like a refresher, payment history is the single biggest determinant of your credit score. For FICO scores, for instance, whether you're on time or tardy with debt payments accounts for 35 percent of your score composition. That explains why borrowers have seen their scores fall so precipitously. Credit score before defaulting Average credit score drop after default (pts) 300 to 600 42 601-660 64 661-720 99 721-780 121 781 plus 175 Though borrowers with super-prime credit are the least vulnerable cohort, their path back to excellent credit won't be easy, Raneri says. 'They probably didn't have a 90-day-past-due on any [account] in the last seven years,' she says. 'And so it's difficult to come out and still become a super-prime again… And it'll take a couple of years probably for that to be in the rearview mirror, for it to fade away enough for it to bring the[ir score] back up.' Unsurprisingly, the lower your credit score, the more likely you have fallen behind in repayment. However, over the past half-decade, higher-credit borrowers have seen the biggest jump into delinquency. Percent of borrowers who are at least three months past due on a federal loan February 2020 February 2025 Percent change 300 to 600 38.8% 50.8% 31% 601 to 660 9.1% 23.3% 156% 661 to 720 1.3% 7.5% 477% 721-780 0.1% 2.1% 2,000% 781-plus 0.1% 0.9% 800% Spoiler alert: What's good for your student loan repayment is mutually beneficial for your credit report and score. Rehabilitate a defaulted loan, and your credit will thank you. Make a series of on-time payments toward your outstanding balance, and your score should increase over time. Of course, it's all easier said than done. And it can be overwhelming when you're wondering where to start. She continues, 'And so, if you have a fear of your credit, then you need to buckle down and just do it because it's not going to just go away. And I feel like there [are] people who with these student loans are kind of gambling with their credit score, thinking that maybe some [relief] is going to come through and it's not going to affect them. And by the time that you see it, it's probably too late. And then you have to start repairing it.' Take it from a certified student loan counselor: The important thing is to get moving. Here are some initial steps to take if your repayment has gone awry or requires a reset: Create or update your budget. It's the best way to understand your cash-flow, minimize unnecessary experience and set priorities, whether for your student loan or other debt payments. Reacquaint yourself with your education debt. You might log into your account (or your private lender's portal) to check your outstanding balances, interest rates and repayment status. Ask for help. While it's critical to be your own expert on your student loan accounts, it's always wise to request assistance. If you're disappointed in your federal loan servicer or private lender, talk to a certified counselor, student debt lawyer or organizations that offer student loan help. Settle on a strategy. Once you know where you stand and are aware of your education debt payoff options, picking a lane will ensure you keep moving toward the finish line. With that said, changes to your cash-flow could necessitate switching tactics down the road. Start or resume monitoring your credit. As you're getting more confident about handling your outstanding loans, track the improvement of your credit score. That can be gratifying and motivate you to stay on track to the bitter end. How to find help The National Foundation for Credit Counseling or your state's student loan ombudsperson are potential starting points. You're also welcome to email the writer at apentis@ Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
CBS News
4 days ago
- Business
- CBS News
Behind on credit card payments? Here's what to do at 30, 60 and 90 days
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. Taking these steps can help you mitigate the damage caused by being late on your credit card payments. Getty Images Credit card debt has been ballooning in recent years, and when you look at today's rate and economic environment, there's really no question as to why. With the average credit card interest rate hovering above 21% and inflation quietly stretching budgets even further, things have gotten pretty tough in terms of finances for a lot of Americans. As a result, more people are struggling to fit both their debt payments and their essentials into their budgets, resulting in an uptick in delinquent credit card payments. But missing even one payment can trigger late fees and a rising balance, making your card debt a lot more expensive — and that's just the beginning. Once you're 30, 60 or even 90 days late, the stakes are much higher. Your credit score can take a hit, your debt could be sold to a collection agency and you might even be facing legal action at some point down the line. But despite the possible consequences, you still have options, and the earlier you act, the easier it is to fix the situation. And, knowing what to do at each stage of delinquency can make all the difference, whether your payment slipped through the cracks or you're struggling to keep up due to a job loss, illness or another financial setback. Take steps to get rid of your high-rate credit card debt now. Behind on credit card payments? Here's what to do If you've fallen behind on your credit card debt, here's how you can start to fix the issue before the damage spirals out of control. If you're 30 days late: Act fast to minimize the impact At 30 days past due, your credit card issuer will likely charge a late fee — usually around $30 to $40 — and increase your balance with accrued interest. That, in turn, can add to the already high costs of your credit card debt. But here's the upside: Most issuers won't report the late payment to the credit bureaus until you're more than 30 days past the due date. That means if you act quickly, you might still protect your credit score. Here's what to do: Make the minimum payment as soon as possible. Sending in at least the minimum Sending in Call your credit card company. If you're facing a temporary hardship, simply forgot to make your payment or experienced another type of issue, it may help to call your card issuer, explain your situation and ask if they'll waive the late fee. Many will, especially if it's your first offense or you've had a good payment history. If you're facing a temporary hardship, simply forgot to make your payment or experienced another type of issue, it may help to call your card issuer, explain your situation and ask if they'll waive the late fee. Many will, especially if it's your first offense or you've had a good payment history. Set up reminders or autopay. Sometimes being late isn't about being unable to pay; it was simply just a mistake. If that's what you're facing, use this opportunity to lock in systems that keep you on track going forward. Discuss your credit card debt relief options with an expert today. If you're 60 days late: Credit score damage starts here If you're 60 days late on your credit card payment, the delinquency will almost certainly be reported to the credit bureaus and your credit score could drop sharply, especially if you had a solid score before. You'll also likely face a penalty credit card APR, which can be 29.99% or higher, applied to your balance going forward. At this point, you should: Reach out to your creditor again. Ask if they offer a credit card hardship program Ask if they offer Consider a balance transfer or personal loan. Consolidating your debt a balance transfer credit card Start aggressively tracking your budget. Cut out nonessentials from your budget and reroute every dollar you can toward the payment. When you're 60 days late on your credit card payment, every delay gets more expensive. If you're 90 days late: The collections clock starts ticking Once you're 90 days late on your card payment, the situation becomes critical. At this point, most credit card issuers will typically escalate your account to a collections department or sell it to a third-party debt collector. Your credit score could fall even further, and depending on the creditor's policies, they may start moving toward legal action. That doesn't mean you're out of options, though. Here's what to do at this point: The bottom line Falling behind on credit card payments is a more common issue than many people realize, especially in this current financial environment. But if you're delinquent on your card payments, the longer you wait to act, the more damage you'll face to your credit, peace of mind and financial future. So, whether you're 30 days behind or are heading rapidly toward collections, don't ignore the problem. Start with a call to your creditor, explore your relief options and take small steps toward a sustainable solution.
Yahoo
4 days ago
- Business
- Yahoo
8 Common Mistakes To Avoid When Applying for a Personal Loan
Getting a personal loan doesn't have to be a nightmare, but way too many people sabotage their own chances before they even get started. To save you the time (and the headache), we've put together the most common mistakes people make when going through the process. Trust us, this list can save you thousands of dollars and a world of difficulty. Learn More: Read Next: Here's the eight common mistakes to avoid when applying for a personal loan. This one's a biggie. Walking into a loan application blind is like showing up to a job interview without knowing what company you're applying to. Your credit score determines everything, up to, but not limited to your interest rate, loan terms and whether you'll even get approved at all. Check your credit score before you start shopping around. If it's lower than you expected, you might want to spend a few months improving it before applying. Even bumping your score up by 50-100 points can mean the difference between a 12% interest rate and an 18% interest rate. On a $10,000 loan, that's serious money over the life of the loan. Check Out: Here's where people get themselves into trouble thinking they're being smart. You might think applying everywhere increases your chances, but multiple hard credit inquiries in a short time can actually hurt your credit score and make lenders nervous. The exception? If you're rate shopping and submit all applications within a 14-45 day window, credit scoring models typically count them as a single inquiry. But spreading applications out over months? That's going to ding your credit repeatedly. On the flip side, some people make the mistake of taking the first offer they get. Personal loan rates can vary wildly between lenders; we're talking differences of several percentage points. Banks, credit unions and online lenders all have different qualification criteria and rate structures. Credit unions often offer lower rates to members, while online lenders might be more flexible with qualification requirements. Don't leave money on the table by not doing your homework. Just because a lender approves you for $25,000 doesn't mean you should take it all. Every dollar you borrow costs you money in interest, and personal loans typically have higher rates than secured loans like mortgages or auto loans. Figure out exactly what you need and stick to that amount. If you're consolidating debt, add up those balances precisely. If it's for a home project, get real estimates first. Borrowing extra 'just in case' is expensive insurance. Monthly payment tunnel vision is real, and it'll cost you. Sure, that $300 monthly payment might fit your budget better than $400, but if it's because you stretched the loan from three years to five years, you're probably paying way more in total interest. Always look at the total amount you'll pay over the life of the loan, not just the monthly payment. Sometimes paying a bit more each month saves you thousands in the long run. Personal loans can come with all sorts of fees that aren't obvious upfront. Things like origination fees, prepayment penalties and late payment fees can add hundreds (or even thousands!) to your loan cost. Some lenders charge an origination fee of 1%-8% of the loan amount, which gets deducted from what you receive. Others hit you with penalties if you pay the loan off early. Know what you're signing up for before you sign anything. Personal loans make sense for debt consolidation, large one-time expenses or emergencies. They don't make sense for vacations, shopping sprees or ongoing monthly expenses you can't afford. Personal loan interest rates are typically higher than credit cards' promotional rates or home equity loans. If you're borrowing for something that's going to lose value or something you could save up for instead, you might want to reconsider. Before you borrow, know exactly how you're going to pay it back. Personal loans have fixed monthly payments, and missing payments trashes your credit and can trigger penalty rates. Look at your budget honestly. Can you comfortably make the payment every month for the entire loan term? If money's tight, consider a longer term or a smaller loan amount. The worst thing you can do is default on a personal loan. More From GOBankingRates I'm a Retired Boomer: 6 Bills I Canceled This Year That Were a Waste of Money This article originally appeared on 8 Common Mistakes To Avoid When Applying for a Personal Loan Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Fast Company
5 days ago
- Business
- Fast Company
Credit scores are sinking for millions in the U.S. Here's why
Millions of Americans are seeing their credit scores suffer now that the U.S. government has resumed referring missed student loan payments for debt collection. After 90 days of non-payment, student loan servicers report delinquent, or past-due, accounts to major credit bureaus, which use the information to recalculate the borrower's score. Falling behind on loan payments therefore can affect an individual's credit rating as severely as filing for personal bankruptcy. A lower credit score makes it harder or more expensive to obtain car loans, mortgages, credit cards, auto insurance and other financial services at a time when inflation, high interest rates, and layoffs have strained the resources of some consumers. The Federal Reserve Bank of New York reported that in the first three months of 2025, 2.2 million student loan recipients saw their scores drop by 100 points, and an additional 1 million had drops of 150 points or more. Declines that steep may mean the difference between a manageable credit card interest rate and an unmanageable one, or approval or rejection of an application to rent an apartment. The U.S. Department of Education paused federal student loan payments in March 2020, offering borrowers relief during the economic chaos of the coronavirus pandemic. Though payments technically resumed in 2023, the Biden administration provided a one-year grace period that ended in October 2024. Last month, the Trump administration restarted the collection process for outstanding student loans, with plans to seize wages and tax refunds if the loans continue to go unpaid. According to the Federal Reserve Bank of New York, about 1 in 4 people with student loan accounts were more than 90 days behind on payments at the end of March. Kat Hanchon, 33, who works in marketing and higher education in Detroit, was one of them. Hanchon said her score dropped by 57 points as a result of her loans falling delinquent this year. That put her score below 600, or subprime. When Hanchon received her statement from her loan servicer, her expected monthly payments were higher than before the pandemic-era pause, even though she had enrolled in a repayment plan that takes a borrower's full financial situation into account. 'They said I now have to pay $358 per month,' she said. 'I'm not going to be able to pay that. … But I'm not unusual in the world we're living in right now.' Hanchon said she's had to prioritize paying medical expenses — for a dental crown, a root canal, and an endoscopy — before she'll be able to consider putting money toward the loans. While her housing situation is secure for the moment, she worries about the annual percentage rate for her credit cards fluctuating. Lenders, landlords, credit card companies, employers and utility companies all look to consumers' credit scores to gauge the likelihood of borrowers being able to make regular payments. A higher score typically results in lower interest rates and more favorable loan terms, while a lower score makes it harder to access credit. The Education Department has said borrowers should receive bills from lenders three weeks before any payments are due, but some people have reported that they have not been notified. Wait times for calls with loan servicers have been high, and layoffs at the Department of Education have also likely contributed to delayed service, consumer advocates say. Dom Holmes, 28, who works for a nonprofit in Manheim, Pennsylvania, said he woke up in early May to find his credit score had dropped 60 or 70 points overnight. 'All of a sudden I was delinquent, even though I'd never received notice,' he said. Holmes has begun the process of appealing the reduction of his credit score, he said. He's been considering a move for professional reasons, and added that he's concerned it could be tough to rent a place to live with his score as it stands. 'I'm at the ideal age where I should be starting a family and buying a home,' he said. 'When you destroy me financially, what are the chances I'm able to do that and that's viable for me?' Holmes, who was the first person in his family to graduate from college, said he still has some outstanding Parent Plus loans, which he intends to keep paying down so that his parents' credit scores aren't affected. He graduated in 2019, shortly before the pandemic, and said he can see how his generation might have difficulty paying off the debt. 'Right as I was entering the workforce, the world really stopped,' Holmes said. 'Things were really bad for a lot of people for a long time. We're still coming out of that. And all of a sudden, the switches got turned back on overnight.' Kevin King, vice president of credit risk at data and analytics company LexisNexis, said he expects the effects of the resumed student loan collections to begin rippling through the U.S. economy in the coming months. 'There were a number of years where it was probably a bad financial strategy to be making student loan payments,' he said. 'A lot of consumers were confused as various government (policies of forgiveness) were passed and overruled.' King predicts that student loan payments will move higher in the so-called 'payment hierarchy,' or the order in which consumers make payments, since the government plans to use 'levers to compel' such as wage garnishment and the seizing of tax refunds. 'Which bill do you pay first, second, and not at all?' King said. 'Historically, student loans are really far down the list. But the government's being pretty aggressive here in pursuing payment activity in a way that may shift the hierarchy. Consumers might be more willing to go delinquent or default on something like a credit card or installment loan.' The Federal Reserve of New York study also found that borrowers ages 40 and older were most likely to be delinquent on their loans. Andrew McCall, 58, of Boise, Idaho, said he has about $30,000 remaining in outstanding loans from earning his computer science degrees. He said he can't afford his monthly payments, which are in the $250-300 range, and worries what a hit to his credit score might mean for all areas of his life. 'The fact that this economy is driven by debt to begin with causes my score to be paramount no matter what financial decisions I'm making, outside of going to the grocery store,' he said. 'My car, my house… Your credit rating becomes a social stratifier.'
Yahoo
5 days ago
- Business
- Yahoo
Credit scores decline for millions as US student loan collections restart
NEW YORK (AP) — Millions of Americans are seeing their credit scores suffer now that the U.S. government has resumed referring missed student loan payments for debt collection. After 90 days of non-payment, student loan servicers report delinquent, or past-due, accounts to major credit bureaus, which use the information to recalculate the borrower's score. Falling behind on loan payments therefore can affect an individual's credit rating as severely as filing for personal bankruptcy. A lower credit score makes it harder or more expensive to obtain car loans, mortgages, credit cards, auto insurance and other financial services at a time when inflation, high interest rates, and layoffs have strained the resources of some consumers. The Federal Reserve Bank of New York reported that in the first three months of 2025, 2.2 million student loan recipients saw their scores drop by 100 points, and an additional 1 million had drops of 150 points or more. Declines that steep may mean the difference between a manageable credit card interest rate and an unmanageable one, or approval or rejection of an application to rent an apartment. The U.S. Department of Education paused federal student loan payments in March 2020, offering borrowers relief during the economic chaos of the coronavirus pandemic. Though payments technically resumed in 2023, the Biden administration provided a one-year grace period that ended in October 2024. Last month, the Trump administration restarted the collection process for outstanding student loans, with plans to seize wages and tax refunds if the loans continue to go unpaid. According to the Federal Reserve Bank of New York, about 1 in 4 people with student loan accounts were more than 90 days behind on payments at the end of March. Kat Hanchon, 33, who works in marketing and higher education in Detroit, was one of them. Hanchon said her score dropped by 57 points as a result of her loans falling delinquent this year. That put her score below 600, or subprime. When Hanchon received her statement from her loan servicer, her expected monthly payments were higher than before the pandemic-era pause, even though she had enrolled in a repayment plan that takes a borrower's full financial situation into account. 'They said I now have to pay $358 per month," she said. "I'm not going to be able to pay that. ... But I'm not unusual in the world we're living in right now." Hanchon said she's had to prioritize paying medical expenses — for a dental crown, a root canal, and an endoscopy — before she'll be able to consider putting money toward the loans. While her housing situation is secure for the moment, she worries about the annual percentage rate for her credit cards fluctuating. Lenders, landlords, credit card companies, employers and utility companies all look to consumers' credit scores to gauge the likelihood of borrowers being able to make regular payments. A higher score typically results in lower interest rates and more favorable loan terms, while a lower score makes it harder to access credit. The Education Department has said borrowers should receive bills from lenders three weeks before any payments are due, but some people have reported that they have not been notified. Wait times for calls with loan servicers have been high, and layoffs at the Department of Education have also likely contributed to delayed service, consumer advocates say. Dom Holmes, 28, who works for a nonprofit in Manheim, Pennsylvania, said he woke up in early May to find his credit score had dropped 60 or 70 points overnight. 'All of a sudden I was delinquent, even though I'd never received notice,' he said. Holmes has begun the process of appealing the reduction of his credit score, he said. He's been considering a move for professional reasons, and added that he's concerned it could be tough to rent a place to live with his score as it stands. 'I'm at the ideal age where I should be starting a family and buying a home,' he said. 'When you destroy me financially, what are the chances I'm able to do that and that's viable for me?' Holmes, who was the first person in his family to graduate from college, said he still has some outstanding Parent Plus loans, which he intends to keep paying down so that his parents' credit scores aren't affected. He graduated in 2019, shortly before the pandemic, and said he can see how his generation might have difficulty paying off the debt. 'Right as I was entering the workforce, the world really stopped,' Holmes said. 'Things were really bad for a lot of people for a long time. We're still coming out of that. And all of a sudden, the switches got turned back on overnight.' Kevin King, vice president of credit risk at data and analytics company LexisNexis, said he expects the effects of the resumed student loan collections to begin rippling through the U.S. economy in the coming months. 'There were a number of years where it was probably a bad financial strategy to be making student loan payments,' he said. 'A lot of consumers were confused as various government (policies of forgiveness) were passed and overruled.' King predicts that student loan payments will move higher in the so-called 'payment hierarchy,' or the order in which consumers make payments, since the government plans to use 'levers to compel" such as wage garnishment and the seizing of tax refunds. 'Which bill do you pay first, second, and not at all?' King said. 'Historically, student loans are really far down the list. But the government's being pretty aggressive here in pursuing payment activity in a way that may shift the hierarchy. Consumers might be more willing to go delinquent or default on something like a credit card or installment loan.' The Federal Reserve of New York study also found that borrowers ages 40 and older were most likely to be delinquent on their loans. Andrew McCall, 58, of Boise, Idaho, said he has about $30,000 remaining in outstanding loans from earning his computer science degrees. He said he can't afford his monthly payments, which are in the $250-300 range, and worries what a hit to his credit score might mean for all areas of his life. 'The fact that this economy is driven by debt to begin with causes my score to be paramount no matter what financial decisions I'm making, outside of going to the grocery store,' he said. 'My car, my house... Your credit rating becomes a social stratifier.' ___ The Associated Press receives support from Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism. By subscribing, you are agreeing to Yahoo's Terms and Privacy Policy Sign in to access your portfolio
