credit tips

Income Based Repayment Now Available for Your Student Loan!

by Vincent Polisi on September 1, 2009

In 2007, the College Cost Reduction and Access Act was passed.   This legislation addressed many issues concerning student loan payments.   Part of this includes Income-Based Repayment (IBR) which became available on July 1st of this year.  Income Based Repayment is available for federal student loans and the Direct Loan program and is designed to save people from student loan default.

The intent of this plan is to help ensure repayment through making the payments affordable.  This plan targets people with low income and those who are going through difficult financial times.  It is also specifically designed to help people who are planning to go into public service that will face a lifetime of low income.  The idea is to give them the extra cash that they need to live on.

How?

Under this plan, monthly payments will be capped as a percentage of the borrower’s income, taking into consideration the size of their family.  Payments will be adjusted once a year, and whenever income or family size changes.  For most borrowers, this will mean that the maximum about of their income that can be eaten up by student loan payments is 15%.

To find out if you qualify, you can check out this  Income Based Repayment Calculator .

Obviously, if you qualify, your payment will be considerably lower that it would be under a standard 10 year repayment plan.  (Keep in mind, the less you pay, the more interest you will pay over the long haul.)

Believe it or not, if your required payment doesn’t cover the interest that is accruing, the government will pay the interest if your loans are Subsidized Stafford Loans for up to three years.

If you follow Income Based Repayment for 25 years and meet certain other qualifications and your loan still isn’t paid off at the end of 25 years, your loan will be canceled!

There is also a Public Service Loan Forgiveness Program.  Under this program, if you make 120 payments through IBR and you have been in a public service job the entire time, your loan balance could be canceled.

If you are already in default, you will not be eligible for this program.  However, you can consider student loan rehabilitation.

Tagged as: , , , ,

{ 2 comments }

Clean Credit with Credit Report Disputing

by Vincent Polisi on August 20, 2009

You probably know that when a bank or other creditor is deciding whether to approve your loan they will look very closely at your credit score.  In fact, it is probably the most important part of your loan application.

Unfortunately, unless you become involved, your credit report is simply a collection of unverified information.  Why?  The three credit bureaus do not have to verify information that is reported to them by lenders prior to posting it to your report.

More and more people are finding incorrect or incomplete information on their credit reports.  This false information can lower your overall credit score and make it much more difficult to obtain a loan with acceptable terms. That is why it is so important to clean credit up. You can repair credit report issues with credit report disputing. Best of all, you can do it yourself.  There is no need to hire a credit repair company!

The first step to cleaning credit is to make sure your credit report is correct. You can start by requesting copies of your file from the three main credit agencies:  Equifax, Experian, and TransUnion.  Each of these agencies collect and report information separately, so while one of them may have wrong data, correct information might be on a different one.  Accounts can appear on one credit bureau but not another as well as be reported correctly on one bureau and incorrectly on another. Check your Credit Report and Score – Fast, Free & Easy at CreditReport.com.

Once you have a hard copy of your credit report then look closely at all the information included.  Make sure that all the loans shown are actually yours, that the available credit amount is listed correctly, and most importantly, that your on-time payments are reflected correctly.  Pay close attention to any loans listed as slow-pay or in default.  This information can have a negative impact on your credit score so be absolutely sure this kind of data is correct.

The credit reporting agencies have taken on an enormous task in collecting, sorting and entering all the raw data into their databases.  It is no wonder that mistakes happen with all the common and similar names that people have and with the rarity that people review their credit files.

If you find mistakes and false information you can appeal the information by contacting the reporting agency.  The main credit reporting agencies have websites that will have a claim form available on them that will make resolution of the problem easier.  To make your claim move forward smoothly it is a good idea to include any documentation that will substantiate what you are saying and why you think it is incorrect.  It is important to frequently look at your credit reports; getting old information removed is much easier than having new data removed or corrected.

After an appeal or claim is filed the lender has 30 days to verify the account as being accurate.  Quite often the creditor will not reply to these credit investigations.  When this happens the bureaus are required to remove any information included in the dispute.

While it may not erase bad credit, credit report disputing is a great way to clean up credit report problems.

Stay tuned for more on how to improve credit score issues!

Tagged as: , , , , ,

{ 2 comments }