Student Loan Myth I: A forbearance or deferment will always fix negative credit reporting

We will be covering ten of the biggest myths in student loans.  We will be doing them in 3 sets over the next couple of weeks.  The first myth is one of the biggest you hear, that because you a forbearance or deferment, you no longer have your previous negative credit reporting.

What you think happens. You are 90 days delinquent and your student loan company has already reported you as both 60 and 90 days delinquent.  However you realize that you have General Forbearance time remaining that will bring your account current.  This forbearance even goes back to the start of your delinquency.  As a result this will fix the delinquency and your credit is restored.

What actually happens. This is where you are wrong.  What a forbearance or deferment in this situation does is bring your account current by rolling your current payment plus any interest back into your account.  However if your account was delinquent on the day your company reports you, you more than likely will stay negatively reported.  Your status of your loan and your reporting status are two completely different entities where one does not necessarily correlate to the other.

Where there may be a morsel of truth to this.  While noncertified forbearances like the General Forbearance or Deferments like the Unemployment Deferment do not qualify, there are certain types that do automatically correct credit.  These include In-School Deferments, Natural Disaster Forbearances, and Military Deferments.  In all these cases though you must be meet certain criteria including at times have a certified official back up your claim.  This burden of proof is what separates what does qualify for a credit correction and what falls short.