7 years is Way too Da## Long!

[RobertEG]

Pipeguy, you make excellelnt points regarding the potential pitfalls in the rulemaking process vs staturory revisions.

What is gained in implementation speed may be lost in judcial review or subject to later and more volatile political change.

Legislative changes do stick to the wall much better!

It just takes a lot to get legislators excited about credit reporting reform......

[RonM21]

It is a long miserable time, but at the same time if it is going to reflect your actual status, and how you have handled credit in the past, there has to be a line somewhere to be fair to the lenders.

[grillandwinemaster]

Many fine points, thank you for all your responses. Much food for thought. This is a rough idea of what I had in mind:

A late payment, 30, 60, 90 day, etc, should be removed after 2ys, 3ys, 4ys max, depending on the severity of the late involved IF the account was brought current, and remain as a positive account. Positive account status after 7 years is what is currently being used. I propose positive account status should be after 2-4 years of the late payment. This would, in my opinion, reflect the creditworthiness of the consumer more accurately. 

A charge off should be removed, like Hookies said, after 90 days IF the account was paid off in full. The very nature of a charge off by definition is indicating the original creditor doesn't believe it will get paid, thus charging off the debt and getting it off the books. The very fact that it was PAID IN FULL, negates the very definition of a charge off, which is uncollectible debt. Thus, by one paying off a charged off debt, the reporting of it, is no longer "accurate reporting."

If a charged off account reaches the "collection" account stage, a step graduated removal process would incentivise the consumer to quickly handle this account. Meaning, the collection could be removed after 3-5 years. 

For example, if an account remains collection status for one year, but the consumer then pays it off in full, the collection should be removed after 3 years of DofFD. If it remains in collection status for 2 years, and then gets paid in full, the collection should be removed after 4 years of DofFD. If the account remains on collection status for 3 years, and then gets paid in full, it should be removed after 5 years of DofFD.

I believe this reflects more accurately an individuals creditworthiness than the exclusionary standards currently being used. For example, under the current standard, if consumer A pays off a collection account after 5-6 months, that collection will remain for 7 years after DofFD. If consumer B ignores the collection altogether, that collection will remain for 7 years after DofFD. From a strictly creditworthiness standpoint, How is consumer B = consumer A? The fact is, consumer B will never be equal to consumer A from a creditworthiness standpoint, therefore, all things being equal, they should not have similar reporting factors. 

What are YOUR thoughts on this? Again, my apologies for my long winded rant. I do believe I have over indulged in coffee this fine morning☺

[Hokies2379]

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@Thomas_Thumb wrote:

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@Hokies2379 wrote:

I agree and disagree.  I think 7 years is fair for unpaid.

However, I think paid should be automatically deleted within 90 day to a year.

I don't think that a paid should stay on there the same amount of time. But that's just me.

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So, it appears you support Fico 09 as do creditors.Creditors want TO GET PAID. Thus, the incentive in Fico 09 (eliminating score penality on many paid in full debts) but, more severe punishment (increased score penality) for those who default on payment. Seems fair to me.

As for the rich who don't give a damn about their score and routinely pay late  ... public exposure may be the best tactic. Perhaps a a blog and/or section in newspapers that list payment delinquencies of the deadbeat wealthy. 

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In theory, yes.  However, the scores don't match.  My 09s are significantly lower than my 08s on experian and equifax.  However, my TUs are 40 points highter.  09 really baffles me.

[CreditDunce]

I have to disagree with this thread.  I think the CRA's should be able to keep positive and negative information for as long as they want.  That doesn't mean a 30 day late will hurt your FICO score forever.  Most credit scores already don't consider minor derog's after a couple of years.   If their credit models do not accurately reflect the risk, then someone else will come along and build a better model.  The better model will end up dominating the market because lenders will make more money using it.

If the CRA's can't keep enough history, then there models are not as accurate.  As the risk is not as well defined, everyone's interest rate has to go up to compensate for the risk.  And let's be honest, here.  Most people who have a history of financially being irresponsible don't change.  Yes, there are people who find MyFico and find religion.  But it isn't the majority of the population.   The kids I knew growing up who spent their entire allowance on bubble gum tend to live pay check to pay check.  The kids who where savers are still savers.

I do have some sympathy for medical collections.  It shouldn't be legal to add a collection unless they at least notify the person about the bill.   Credit models should at the very least discount medical baddies.

[Hevj1119]

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@Anonymous wrote:

I also think late payments shouldn't impact ones credit score as long as they do.  7 years is a long time for those.  Once an account is paid in full, lates from that account IMO shouldn't impact the score much if at all.  A large part of ones credit score is their ability to pay back financial debt.  If the debt is paid back, and ON TIME, then the account holder has in my view proved their creditworthiness.  An obnoxious example:  Someone has a loan that's 36 months.  Person A pays all 36 payments on time while Person B doesn't pay the first 35 payments (gets 35 late payments) but pays it off in full, on time, before the 36th payment is due.  To me, technically, Person B isn't any less credit worthy than Person A as they met their financial obligation in the same amount of time.  In fact, if Person B ends up paying significantly more interest as a result of not paying down the loan as they went along ironically one could argue that their creditworthiness is greater than Person A as they paid back an even greater amount of money in the same period of time.  I know this is a ridiculous example, but you get my point.

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I believe credit worthiness is essentially, did someone live up to their end of the agreement.  

In your example, Person B did not live up to what was agreed upon at the beginning of the loan.  The agreement was you can borrow X dollars for X period of time, you will pay me back X dollars a month by the X date of each month and if you don't you pay a late fee.  The agreement was NOT you can borrow X dollars for X period of time and pay me on whatever day of the month you feel like as long as your payments are "around" x dollars and you pay me a total of X dollars within X period of time.  Person B was not their word and deserves to be held accountable for that.  It doesn't matter that Person B benefitted the lender more financially overall - Person B didn't do what he agreed to do.  The next guy considering to give Person B a loan deserves to know that Person B is the kind of guy who only does PART of what they say they're going to do, not all.  

[Anonymous]

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@Hevj1119 wrote:

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I believe credit worthiness is essentially, did someone live up to their end of the agreement.  

In your example, Person B did not live up to what was agreed upon at the beginning of the loan.  The agreement was you can borrow X dollars for X period of time, you will pay me back X dollars a month by the X date of each month and if you don't you pay a late fee.  The agreement was NOT you can borrow X dollars for X period of time and pay me on whatever day of the month you feel like as long as your payments are "around" x dollars and you pay me a total of X dollars within X period of time.  Person B was not their word and deserves to be held accountable for that.  It doesn't matter that Person B benefitted the lender more financially overall - Person B didn't do what he agreed to do.  The next guy considering to give Person B a loan deserves to know that Person B is the kind of guy who only does PART of what they say they're going to do, not all.  

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I agree with what you're saying, but I think there are exceptions.  My example may have been a bit extreme, but I think there are plenty more realistic situations where the "good" that a person may exhibit in terms of stellar creditworthiness far outweighs the "bad" but FICO models don't give any credit for the "good" above the expectation.  While it's unrealistic that one would ignore 35 payments on a 36 month term, it's not unrealistic for someone to pay extra.  If a monthly payment is $250 and the borrower pays back $500/mo, they are exceeding expectations above and beyond what the terms of the loan state.  I'm not suggesting that anyone should be given "extra points" for exceeding expectations, but I DO believe that exceeding expectations to some degree should combat a minor hiccup along the way.  The guy that pays $500/mo each and every month then on the final month gets his dates screwed up and pays late and scores a 30-day late prior to final payoff.  That to me is an example of something that shouldn't hurt someone when you look at the overall body of work that is the loan from start to finish compared to the guy that made the minimum monthly payment on time for the duration.

[Thomas_Thumb]

Having a score penalty removed is a good incentive for paying a debt in full while it is still on File. That's a reasonable enticement for making restitution on an outstanding debt and creditors do prefer to get paid. However, I'd also advocate payment history and public records remain on file for the established timeframe (7 years in many cases). 

Late payments are different. If you are late a couple months and then pay balance due some score penalty should remain and that penality should increase in severity for habitual offenders. In many cases this timeframe (for score impact) appears to be  2 or 3 years. Again, keep history on file for a full 7 years.

Lenders should have the right to know payment behavior of an applicant in their decisioning process. Thus, the importance of maintaining payment records for an extended time period. However, hefty scoring penalties and established cutoff scores can result in rejection without file review. By eliminating the score penalty (but maintaining the record) some "potentially qualified" applicants can avoid auto reject and at least get their file reviewed. Because payment history is still there, lenders do have the ability to make an informed decision.

[Anonymous]

What you're saying makes sense, except the problem is that it's much easier for a lender to see the "bad" behavior than the good.  What I mean by that is that if a lender takes a quick glance over ones file they'll instantly see the yellow/orange/red lates that pop right out at them.  What they don't immediately see without more careful inspection is the times that expectation was exceeded, that is, if the borrower was paying back at a rate of 2-3x what was required.  A string of "greens" is a string of greens and I doubt that lenders really go through much trouble to see anything past that.  Sure, maybe for a major loan like a mortgage where the file may be gone through with a fine tooth comb, but not something simple where someone makes a decision in a minute or so and certainly not when a computer makes the decision in 10 seconds.  You said "lenders should have the right to know payment behavior of an applicant in their decisioning process."  Agreed; of course they should.  The payment behavior of one that's paying 2-3x (or more) than is required monthly however should be considered IMO.  I think the act of paying significantly more than is required is easily as powerful of an indicator of their creditworthiness and/or behavior as an occasional late payment may be, yet as I said it rarely gets considered by a human and NEVER gets considered under FICO scoring.

[Hevj1119]

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@Anonymous wrote:

I agree with what you're saying, but I think there are exceptions.  My example may have been a bit extreme, but I think there are plenty more realistic situations where the "good" that a person may exhibit in terms of stellar creditworthiness far outweighs the "bad" but FICO models don't give any credit for the "good" above the expectation.  While it's unrealistic that one would ignore 35 payments on a 36 month term, it's not unrealistic for someone to pay extra.  If a monthly payment is $250 and the borrower pays back $500/mo, they are exceeding expectations above and beyond what the terms of the loan state.  I'm not suggesting that anyone should be given "extra points" for exceeding expectations, but I DO believe that exceeding expectations to some degree should combat a minor hiccup along the way.  The guy that pays $500/mo each and every month then on the final month gets his dates screwed up and pays late and scores a 30-day late prior to final payoff.  That to me is an example of something that shouldn't hurt someone when you look at the overall body of work that is the loan from start to finish compared to the guy that made the minimum monthly payment on time for the duration.

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Reports can and do show a payment history.  So the lender will see the accurate history - the payment was $250 / guy paid $500, late the last time.   It's the truth - why hide it?  Dude. made. his. payment, late.  There's a million and one excuses as to why but the bottom line is, that's what happened.  Plenty of people get credit cards and loans with the occasional late payment on their report.  

I think this thread in general loses sight of the fact that a credit report / score is not meant to punish someone for missing payments, nor is it meant as a means to reward someone for making their payments on time.  Your credit score is not for you.  My credit score is not for me.  Our scores are ABOUT us, but not meant FOR us.  A persons credit score is generated solely FOR the LENDER.  The purpose of a persons credit report is to give the LENDER a truthful record of someones history so they can make a decision about whether or not they want to lend that person money.   It would not be fair to the LENDER to paint an inaccurate picture of how someone pays their bills whether that be on time and in full, in full but not on time, extra but late, or not at all.