Congress said the pause on student loan payments shouldn’t affect borrowers’ credit scores. Yet roughly 5 million borrowers' scores may have been dinged, including Brooke Evans, who has $45,000 in debt.
On a Saturday morning earlier this month, Brooke Evans was participating in a conference via Zoom ZM, -0.56% when a distraction popped up. An email from Credit Karma, a company consumers can use to access their credit score, notified her that a remark had been added to her credit report via Equifax EFX, +0.22%, the credit reporting agency.
“It’s another pressure, it’s another thing to worry about, it’s another battle to have to fight,” she said. “It’s too much.” “The faith in these credit reports being accurate is just enormous,” said Seth Frotman, the executive director of the nonprofit advocacy group Student Borrower Protection Center, which filed a class-action lawsuit against Great Lakes, Equifax, TransUnion TRU, -0.66% , Experian EXPGY, -0.71% and VantageScore accusing the companies of illegally damaging borrowers’ credit scores. “When the companies responsible fail, and in this case fail miserably, it could impact millions of borrowers’ lives.
It’s a system that’s now used widely beyond its original intentions and that consumers have almost no way of opting out of if they want to use credit, said Dalié Jiménez, a professor at University of California, Irvine law school. The U.S. Department of Education had instructed servicers to report the paused payments to the credit agencies as if borrowers owed a $0 monthly payment, that they had paid it, and that they were current on their loans. Instead, Great Lakes reported those $0 monthly payments as deferred, Kiser said.
“Credit Karma has no role in aggregating from the financial institutions the data VantageScore uses, nor does it own or contribute to the VantageScore 3.0 model,” Donohue wrote in an email. “Rather, Credit Karma is merely a conduit by which a member’s VantageScore is passed from the bureaus to our members .”
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