Lender's goof slams credit scores

Such a serious drop in credit scores can cause havoc on a borrower's finances. Credit card companies may jack up interest rates in response to a plunging score, and insurance companies may increase the premiums they charge. Borrowers may be denied other credit or charged more because of their lower scores.

• Video: How to get a free credit report

Sallie Mae markets the graduated-payment student loans as an option for borrowers who are just starting their careers or who need lower payments because of economic setbacks. Borrowers are allowed to make reduced payments in the initial years of the loan, sometimes paying just interest for up to four years before larger payments kick in.

Working on a solution

News of the blunder began circulating last week on Internet user forums, including CreditBoards.com, and spread as more borrowers checked their scores or were notified by subscription credit monitoring services that their FICO scores had changed.

One borrower, who preferred to remain anonymous, found the error had dropped his Equifax FICO score to 660, while his score remained 782 at TransUnion and 820 at Experian. After Sallie Mae announced the fix, his Equifax score zoomed back to 789.

If you have a graduated-payment loan from Sallie Mae and are concerned it may hurt your credit, here's how to find out whether you've been affected and what to do about it:

• Obtain a copy of your Equifax credit report, which is available once a year for free from AnnualCreditReport.com. If your Sallie Mae loan account includes a note under the "Descriptions" heading reading, "Arrangements made with credit grantor to make partial payments," your credit has likely been affected -- even if the account shows "paid as agreed" elsewhere on your report.

• Take a look at your actual FICO scores, which are typically not available for free. You can buy your Equifax FICO score from Equifax.com or MyFICO.com for $15.95. For comparison purposes, you can buy your FICO scores from Experian and TransUnion, at MyFico.com for $15.95 each (those two bureaus don't sell FICO scores directly to the public).

• You can dispute the erroneous description directly with Equifax by using the link provided with your credit report. Make it clear in your dispute that the account is not delinquent and is being paid as agreed.

• If you're having a problem with a loan or other credit account because of the Equifax glitch, Sallie Mae has promised to provide help. "We recognize that some customers may need a credit reference during this interim period, and we will gladly and promptly supply one to assist them," Sallie Mae's Holler wrote. "Anyone with questions about their Sallie Mae account may contact us at 1-888-2-SALLIE."

Liz Pulliam Weston's new book, "Easy Money: How to Simplify Your Finances and Get What You Want Out of Life," is now available. Columns by Weston, the Web's most-read personal-finance writer and winner of the 2007 Clarion Award for online journalism, appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.

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