Student Loans Not on Credit Report: Why Could They Have Disappeared and What It Does and Doesn't Mean

Student loans not on credit report – why? What happened? Student loans disappear from credit reports 7.5 years from the date they are paid in full, charged-off, or entered default. However, education debt can reappear if you dig out of default with consolidation or loan rehabilitation.

Student loans can have an outsized impact on your credit score. Most student loan borrowers have more than one loan showing on their credit report. If they pay on time and keep their loans in good standing, the credit scoring models will increase their score. And suppose they fall behind and enter delinquency. In that case, their student loan servicer will send negative information to the credit bureaus for each loan. But what happens to your score if your student loan shows closed on your credit report?

Student debt may first appear on your credit report with credit reporting agencies within weeks after you borrow the loan. Private and federal loans will remain on your credit report no matter which student loan repayment plan you’re in or whether you’re in deferment or forbearance. The accounts will remain there until you pay them off, they go away, or they fall off after you’ve been in default for 7.5 years.

Federal loans can reappear on your credit report when you bring them back into good standing with loan consolidation or loan rehabilitation.

Learn More: Student Loan Account Closed Due to Transfer

If your student loan disappeared from your credit report and you haven’t fully paid them off more than 7.5 years ago, then mostly likely your loan servicer made a mistake, or you fell into student loan default more than 7 years ago. Remember, even if your loans no longer appear on your credit report, you’re still legally obligated to repay them.

Remember, Federal student loans default after 270 days of missed payments. Private student loans typically default or charge off about 120-180 days after your last required student loan payment.

Learn More: How Student Loan Default Affects Your Credit Score

There’s no statute of limitations for federal student loan debt. So even if your loans no longer show in your credit history, you still owe your loans. They didn’t go away. And that means the U.S. Department of Education can still garnish your wages, take your tax refund, and offset your Social Security Benefits.

In addition, your defaulted federal student loans will remain on the CAIVRS database, and that will stop you from getting a federally backed mortgage (FHA, VA, etc.) and qualifying for new Federal Student Aid.

You can avoid these consequences by getting out of default by:

1. Negotiating a federal student loan settlement

2. Applying for a Direct Consolidation Loan

3. Entering into the loan rehabilitation program

Neither option will put the payment history back on your report if it’s already been removed from your credit report after 7.5 years. However, loan consolidation and rehabilitation will put the loan amount back on your credit report. Adding the loan balances back to your report shouldn’t hurt your FICO score.

Plus, you qualify for affordable repayment options, loan forgiveness, and new Federal Student Aid to go back to school once you’re out of default. If you manage these new payments on time then that should ultimately help your credit score.

Note: Private student loans do have a statute of limitations. A private lender could still sue you if the time limit runs out. But you would have a defense that the time to collect has passed.

There are several reasons a student loan account might be reported as closed. Some reasons may need your attention, while others aren’t a cause for concern.

You paid off or refinanced a student loan and now it’s not on your credit report.

Paying off a student loan closes the account on your credit report. Since you’ve finished paying off your debt to that creditor, there’s no need for it to remain active on your report. Consolidation and refinancing, on the other hand, pay off your student loan debt with one creditor but give you a new loan with the same or different lender in exchange. Note: your lender will make a hard inquiry on you and your cosigner’s credit report if you refinance.

You defaulted on your student loan debt a while ago and suddenly it fell off your credit report, does that mean you don’t owe anymore?

If you fail to make on-time payments, the federal government and private lenders will report a default status to the major credit bureaus. From there, the late payment history will remain on your report for 7.5 years. After that it will fall off but it does not mean you are off the hook.

It’s important to know that even though the credit bureaus aren’t tracking them anymore, your loan servicer still is. We delve more into this at the end of the article including ways to help you get out of default.

The credit bureau made a mistake.

Mistakes happen. Sometimes your education loan may show that it’s closed even though you’re still paying on it. When that happens, you can file a dispute with the credit reporting bureau to have your account put back on your report. You’d only want to do this if you had a positive payment history. Bringing back negative information can ruin your good credit.

Is a student loan account closed due to inactivity? Unlike credit cards and other revolving accounts, student loans are never closed due to inactivity. Deferment, forbearance, and $0 monthly payments under an income-driven repayment plan all keep your account active even if you’re technically not paying.

How long a closed student loan account stays on your credit report depends on how you handled your monthly payments.

• Student loans in good standing: If you consistently made on-time student loan payments until you paid your loans off, your student loans can remain on your credit report for up to 10 years. That’s good news. Payment history has the most positive influence on your credit score.

• Delinquent and defaulted student loans: If you defaulted or had late payments on your loans, the negative information would be removed from your credit report after 7½ years from the date the loans were first reported as delinquent. However, if you discharge student loan debt in bankruptcy, then the bankruptcy will remain on your credit report for up to 10 years.

It’s unwise to remove paid-off student loans, mortgages, credit cards, and other accounts from your credit report if they show a positive payment history. Your credit score will continue to receive a boost from those accounts.

But suppose you have derogatory credit from your student loans because you missed payments or defaulted. In that case, you’ll want that information off as soon as possible. You can use annualcreditreport.com to get your free credit report from Equifax, Experian, or TransUnion every 12 months to verify negative information has been removed as required by federal law. If you notice that negative information still lingers, you can file a dispute.

Learn More: How To Get Student Loans Off Your Credit

Note: Many credit scoring models exclude paid-up collections accounts. However, some lenders use older models. So you may want to hire a credit repair professional to dispute the negative information.

Closed student loan accounts can cause your credit mix to change, affecting your score potentially positively and negatively. Credit mix refers to the types of accounts you have — installment loans, revolving accounts, credit card debt, mortgages, etc. It counts for 10% of your FICO score.

Positive Impact of Closed Student Loan Accounts:

• Paid Off Student Loans: When you pay a student loan in full, it closes the account but it doesn’t disappear from your credit report. It will reflect as a paid account which is positive information for your credit history and can boost your credit score over time.

Negative Impact of Closed Student Loan Accounts:

• Shorter Credit History: If the paid-off student loan was the oldest account on your credit report, it may shorten your credit history and could drop your credit score.

• Credit Mix: Paying off a student loan means you’ve reduced the variety or ‘mix’ of credit types. A good mix of diverse credit type can positively impact your credit score

• Higher Credit Utilization: If the closed student loan significantly reduces your total available credit, it could increase your credit utilization ratio, which can negatively impact your credit score.

Managing Closed Student Loan Accounts

Even though closing a student loan account might impact your credit score, it’s generally beneficial in the long run. The most important thing is to continue practicing good credit habits such keeping your other loan repayments on time, maintaining a low credit card balance, and not applying for too many new credit lines at one time.

As mentioned before, credit bureaus can make mistakes. So if you think that your loan was incorrectly removed due to one of the reasons below, you’ll want to rectify that as soon as possible. Here’s what could have happened.

1. Incorrect Loan Balance or Status. This is a common error where the amount of the loan or its status (whether it’s in deferral, repayment, or default etc.) is incorrectly reported. This can lead to undue penalties and a poor credit score.

2. Duplicate Entries. Sometimes, the same student loan may get listed more than once. This effectively doubles your debt and can drastically decrease your credit score.

3. Loan Servicer Errors. A loan servicer could erroneously report late or missed payments, which can significantly impact your credit score. Certain loan servicers might also fail to report when your loans are paid off or significantly reduced.

4. Identity Errors. These errors occur when a student loan that belongs to someone else (with a similar name or social security number) appears on your credit report.

5. Closed Accounts. Reported as Open Even after a loan is paid off, it might still be reported as open on a credit report. This is inaccurate and can affect your credit history negatively.

6. Incorrect Delinquency or Default. Status If you’re sure you have made payments on time, but your credit report shows a delinquent or default status, it could be an error that needs to be rectified.

7. Errors Related to Loan Forgiveness or Consolidation. If you’ve had your student loans forgiven, consolidated, or discharged due to bankruptcy or disability, but this change is not reflected accurately on your credit report, it could lead to credit issues.

If you still owe on your student loans and they disappeared from your credit report, they are likely still a problem. The current freeze on the interest rate and collections due to the coronavirus pandemic is the perfect time to fix your student loan mess. Let’s talk. I want to help you develop a strategy to deal with your debt.

Schedule a call with me today. We can go over your options together and help you begin picking up the pieces.

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