FICO Scores Drop Over 100 Points After Sallie Mae Recode, Potentially Millions Affected

Consumers are complaining that a change in how Sallie Mae decided to recode some loans caused their credit score to drop by over a hundred points. That’s enough to make a $93,240 difference in a home loan’s total cost. Here’s what happened.

Sallie Mae offers a variety of loan repayment options. One of these is a graduated repayment, with low non-principal payments for the first few years, with the payments slowly getting bigger over time. Before, this loan was coded the same as all other Sallie Mae loans. Now Sallie Mae has added the comment “Arrangements made with credit grantor to make partial payments” to the graduated repayment loans. To the credit bureaus, this comment is a black mark; ConsumerismCommentary says that it means that, “Sallie Mae is reporting the your loan balance is fully due immediately and that your payments are behind more than 60 days.” Reader Jules, a victim of the credit score downgrade, writes, “Hopefully if enough of us complain this can get fixed soon, and hopefully before my credit card company notices and takes an opportunity to jack up my rate since I no longer have excellent credit.”

The error appears to be limited to Equifax for the moment. Posts later on in the forum say that Sallie Mae officials are aware of the issue and are sending an update to Equifax later this week with a request to change back to the old way of reporting.

For insight into how just a few points lower on your credit score can affect your life, read How Much Do Credit Scores Really Matter?

*new error in Sallie Mae reporting* WTH happened – why is FICO contradicting itself? Please help! [myFICO forums]


Edit Your Comment

  1. azntg says:

    Sallie Mae probably couldn’t care less. They’re truly one of the few companies in this country that can do a “hit and run” and get away with it scot free.

  2. SkokieGuy says:

    I agree that Sallie Mae couldn’t care less. She’s wandering around somewhere in Africa filming starving kids who – no wait….nevermind.

  3. Saboth says:

    Hmm I did the graduated payments with Sallie Mae. I just checked my free credit report and didn’t have any black marks…but we all know those reports usually lag behind by about a month.

  4. Radoman says:

    Credit scores have too much power to remain entirely unregulated, in my opinion.

    They are used for everything from getting a loan to finding a job in some cases. Yet they remain completely independently maintained and verified. How can a number that affects the well being of so many millions of people continue being calculated completely without government oversight?

    I predict it won’t stay this way for too much longer. People are pissed about the mortgage crisis, and a large amount of that anger can be placed squarely on the shoulders of Fair Isaac for allowing people to game the system.

  5. DeltaPurser says:

    @Radoman: EXCELLENT point!!!

  6. bohemian says:

    I agree with Radoman. If credit scores are going to be used as the defacto measure of people on everything from finance to insurance and even job applications it has to be regulated.

    Not only can consumers find ways to game the system but many people have had their score damaged when they didn’t really do anything and can’t get it corrected.

  7. RobinB says:

    Oh, great, more of my borrowers will have credit score problems soon. I love my job. I love my job.

  8. Zombilina says:

    Every time I hear of Sallie Mae screwing over its borrowers I thank God I consolidated my student loans with the Department of Education. I’m not smug, just relieved.

  9. Saboth says:

    Actually I just rechecked my score…Experian doesn’t show anything bad, but Equifax did. (Of course I had to pay for both of these scores).

    My FICO score had plummetted to 655. I believe it was 780 last time I checked. The 3 negative items listed were “serious delinquency”, “balances on accounts that are past due”, “you recently missed a payment”. I checked the payment history for all accounts, and all were made on time. The only negative located was “arrangement made with credit grantor to make partial payments” for Sallie Mae.

    I called them and the guy in India said they were aware of the problem and were working on it or some such….

  10. Jevia says:

    I know we can get our credit report for free once a year from the companies, but you still have to pay for your credit score. We should be able to get our credit score for free too.

  11. urban_ninjya says:

    I think people really shouldn’t care what their credit score is. By caring, it sort of ruins the system.

    It’s like studying specifically for the SAT. Because people can now buy SAT study guides, a below average student could study specifically to get a high SAT score. And because of this SAT alone is no longer a good indicator of their college survivalbility. Because ideally you want a student that can get as close to the top score without studying for the SAT.

    Same goes for credit. Now people can look up their credit score and improve the credit score. But they arn’t really improving their income and their spending habits that fundalmentally makes people able to afford what they can afford.

    It’s sad that SATs and Credit Scores determine our lively hoods mainly because we don’t have anything better. And companies are willing to sell out the system in order to make a profit.

  12. Holy crap that would hurt!

  13. dadelus says:

    Glad this didn’t happen last year.

    I bought a house late last year and consolidated all my student loans in the middle of the process. I didn’t know it at the time but it was one of the best decisions I could have made. Some how Consolidating the loans ended up raising my score nearly 100 points which pushed my score into the high 700s which in turn saved me a bundle on my home loan.

  14. karlmarx says:

    Sallie Mae does what they want, they refuse to stop callng you and send you threatning letters regardless of what the laws are, they are predators and need a class action to stop them.

  15. Snakeophelia says:

    I recently signed up with MyFico and absolutely love it. I paid off a loan last Monday and two days later, there was MyFico letting me know how much my score had risen.

    And I disagree that it’s wrong to focus on these scores. Given their importance when a consumer attempts to do anything involving credit or debt, you’d be a fool NOT to pay attention to your score. It’s true that scores aren’t related to income, but the only way that I managed to raise my score in the past year was to change my behavior, and I think having a constant reminder of what my score is will keep me on track, just like a scale in your bathroom makes it easier to keep your weight in check. Of course, my husband and I are both so competitive that we know each other’s FICO and body fat percentage and we challenge each other constantly. :)

  16. floofy3223 says:

    Just checked my Equifax score, and it’s gone down 102 points from 702 to 600 because of my Sallie Mae loan. I called Sallie Mae, and the nice girl from India informed me that Sallie Mae was aware of the problem and that it would be fixed “as soon as possible.” Of course, she had no idea how long “as soon as possible” was.

  17. fizzyg says:

    I just sent an email asking about it. Honestly I haven’t had much of an issue with Sallie Mae and my loans; it’s been really easy to this point.

    One thought though, for anyone really freaking out, is that when I went for a home loan last year they took the middle score, ignoring the highest and lowest. Anyone else doing the same would toss out the Equifax score in this case.

  18. timmus says:

    What will it take to get a goddamn consumers union to rise up against the credit bureaus? Obviously it doesn’t do a lick of good to complain to our bought & sold Congressmen. There can only be power in numbers here.

  19. fuzzycuffs says:

    Isn’t it kind of scary 3 faceless organizations with wildly different ways of “grading” your credit can essentially control your life?

  20. pez2424 says:

    Thank God.. someone else had this happen to them. Mine dropped 50 points two days ago when this changed happened. I called and they didnt understand. i will give it a couple more days then complain again. This is such bull s*** from sallie mae

  21. KRF says:

    This is scary. I recently changed my payment plan with Sallie Mae to pay less for two years, then it goes back up after that. I monitor my credit report and score through AMEX, and nothing’s changed recently.

    I don’t see why students should be penalized for trying to make their payments – isn’t it better for Sallie Mae to get paid on an altered schedule than not at all?

    Has anyone contacted the credit agencies with a dispute?

  22. the_wiggle says:

    @Radoman: appropriate oversight & access cannot come soon enough.

    1 score system. immediate anytime access. nothing less is remotely acceptable.

    nothing less.

  23. ellis-wyatt says:

    @Radoman: You are spot on. FICO scores have WAY too much influence on things, credit related and otherwise.

    In my view, that’s happened because the companies that use them are too quantity/volume-oriented and too incompetent to use human judgment in making their decisions as used to be the case. They let computer modeling and murky statistical “analysis” make decisions for them because it’s supposedly more efficient (read ‘cheaper’) for them to do so. It will take the legal system to get this whole credit scoring/FICO nonsense under control. Hopefully, this whole mortgage mess will get the attention of enough of the powers that be and they will come to understand that nothing of this magnitude ever came close to happening when people were making these decisions instead of computer models that are built by people who have no clue. No, I’m not that old, just realistic. The sad part is that I doubt the powers that be will straighten this out.

  24. @the_wiggle: Word. If my score is so damn important, why do I have to pay to get it?

  25. descend says:

    One of these is a graduated repayment, with low non-principal payments for the first few years, with the payments slowly getting bigger over time.

    AKA interest-only loans? These are more risky, and should be coded as such!

  26. rdileo says:

    @descend: What the $&@!….”coded as such” . The issue is NOT the type of loan. The issue is how it was reported and interpreted by the Credit Agencies. The manner in which it was reported was interpreted by the agencies as though the borrower COULD NOT make FULL payments in a timely manner and went into a “Special Arrangement”. This is interpreted negatively by the credit agencies. It’s as if you had a high balance on your VISA card and could not make the minimum SO you made arrangements to pay less than the required minimum. The sallie mae issue is simply NOT the same thing.

  27. rdileo says:

    What the hell???….”coded as such” so these are more risky . The issue is NOT the type of loan. The issue is how it was reported and interpreted by the Credit Agencies. The way manner in which it was reported was interpreted as though the borrower COULD NOT make FULL payments in a timely manner and went into a “Special Arrangement”. This is interpreted negatively by the credit agencies. It’s as if you had a high balance on your VISA card and could not make the minimum SO you made arrangements to pay less than the required minimum.

  28. ShortBus says:

    Folks, credit bureaus *are* regulated by law. Look into the Fair Credit Reporting Act (FCRA) and the Fair Credit Billing Act (FCBA). The FCRA, especially, has some real teeth. I know–I’ve personally filled suit under it. Additionally, many states have additional, consumer-credit laws.

  29. synergy says:

    Still REALLY glad I consolidated Sallie Mae loans with someone else!

  30. heavylee-again says:

    @Radoman: People are pissed about the mortgage crisis, and a large amount of that anger can be placed squarely on the shoulders of Fair Isaac for allowing people to game the system.

    I think you’ve made a lot of valid points, but how exactly is the mortgage crisis the fault of FICO?

    The fairness/validity of the scoring system aside, they just produce the scores. It was the lenders who chose to lend money to people with ‘subprime’ scores, and investment banks who decided to artificially inflate the value of the resale of these loans.

  31. Kevin Cotter says:

    Credit scores started off fine, their main purpose was as an indicator of the propensity to pay off a mortgage without incident. The scoring indicators were not meant for insurance, auto loans, or anything besides mortgages. When people had certain high scores, the amount of verification dropped, and some debt ratios were increased.

    The bastardization of credit score occurred when other lenders started using it, and when people started to game the hell out of the systems. It’s become a commodity for an lending today.

    I’m expecting a son to be born in July; I’ll bet I can get him an 850 FICO by his 18th birthday?

  32. Saboth says:

    For people stating you have the graduated payments, but checked your score through someone besides Equifax, and your score is fine…it is simply because Equifax is the only agency that has updated accounts using the new code. All of the other agencies will catch up to them soon and report the same drop in score.

  33. Kevin Cotter says:


    If Mortgators had to underwrite those loans the old fashioned way many of those loans would not have been made. The automation with scores and desktop underwriting turned the professional underwriters into document collectors.

  34. @ellis-wyatt: THIS (and that).

    All this worrying about FICO scores pisses me off. Specifically, the idea that FICO controls one’s destiny and rules one’s life pisses me off. Since when do the credit bureaus have the power to regulate human behavior, not the irresponsible kind that has to do with actual creditworthiness, but in general.

    I have a Capital One card. I would rather have one from my credit union (with a better rate, better customer service, etc.) and cancel the C1 card. Noooooo, I can’t do that because it’ll hurt my FICO score.

    Balderdash! Balderdash and poppycock, I say! Responsible credit behavior (closing unused revolving accounts) ought to be rewarded, not punished. Why on Earth should canceling unneeded credit card accounts, regardless of age, hurt me? I’ve paid my bills on time for nearly thirty years; potential creditors ought to be kissing MY ass, not the other way around.

    If there was only some way to rebel against this. I could argue to you people that they only have you by the nutsack if you think they do, if you pay them too much attention, but I’d get fifty replies saying I’m wrong. Still, what would happen if people suddenly ignored the FICO monster? Would it go away?

  35. Saboth says:

    @Steaming Pile: Well see, you and I can ignore the score all we want. However, we can’t be shocked when we go get a car loan and have to pay 10% interest, or when our mortgage loan is denied. I totally agree… this credit score thing is out of hand. It should not be used to determine insurance rates, every loan under the sun, even JOB applications are affected by the score now. It has way too much weight in our society…look at what happened. I’ve made every payment on time, EVER – on cars, student loans, home, credit cards and one agency screws up their reporting, and now I am a credit risk?

  36. ConsumerAdvocacy1010 says:

    @Jevia: I just e-mailed my senators and representatives about this issue :)

    As in, about the FICO score itself not being free or included in the free credit report….

  37. Saboth says:

    I just checked my score again, and apparently Sallie Mae has remedied the problem (at least for me). Score jumped up about 120 points today, back to where it should be. But yes…your credit score should be readily available to you, and not something you pay $15 for each time you want to check it.

  38. pandroid says:

    I pulled my equifax report this morning (hadn’t used my free one yet this year) and it doesn’t have any negative information on it. Now, I know I’m under one of their weirder plans, because I paid interest only for the first few years. So either it’s only affecting some random sample of borrowers, or they’ve already started to fix it, or it’s only affecting those still paying less than you would at a level payment, since I’ve been paying on my principal for a few years now.

  39. jeff303 says:

    @urban_ninjya: So instead it should be a mysterious system that nobody really understands? It’s pretty clear that the current “system” isn’t working too well. People with good financial sense and responsibility don’t necessarily get the best credit scores. They should be allowed to game the system wherever possible, especially given how pervasive and important it is for their lives.

  40. Kajj says:

    @Snakeophelia: Is this an adbot?

  41. Pro-Pain says:

    @Snakeophelia: Your post was disturbing in so many ways…

  42. hotcouponmama says:

    I have myfico and got the alert last week. My score dropped 50 points! I called SM and they acted like I was some kind of idiot, like I couldn’t possibly know what I was talking about and there was no way in heck they could have made a mistake.

    6 calls later I finally got some information that said no, this affected thousands of people. No apology – just an “oops, we f’ed up – deal with it!”

    If you get ahold of the call center, it’s outsourced to India where they seem to have no idea why a drop in credit score might make a difference in your financial world here. So now when I get ahold of an operator, I immediately ask to be transfered to an operator in the US – and they will put you though to the US instead.

    My score did get fixed this moring. What a pain in the backside!