Clean up credit reports?

[Anonymous]

I was reviewing my reports in more detail than usual and I notice there are 3-4 accounts that have been closed for years showing up as open, some look like they are on there twice.  One old car loan appears to have 2 loans both reporting old lates from 2013, however summary says only 2 accounts have baddies (car loan and mortgage from same time frame) so I dont think its effecting my score.  Most problems seem to be with EQ - should I work on getting these cleaned up?  Overall my scores are fine - kind of thinking if it aint broke.   I am just concerned the open accounts would get counted against my DTI at some point though I think a manual review could see these as duplicates easily enough. 

[Anonymous]

My suggestion is to go through your reports (all three) and circle everything that isn't exactly right.

Then on another sheet of paper begin sorting these into things that might be hurting you vs. those that aren't -- or indeed might be helping you.

For example, consider the accounts that are old, perhaps listed twice, and are wrongly listed as open.  My guess is that this is a good thing.  As long as their are no derogs associated with the accounts, and the accounts correctly show a balance of $0, then this is helping you.  Very old accounts listed multiple times with $0 balances are helping your AAoA and (if listed as open) your utilization.  Assuming they correctly show a $0 balance, then they won't affect your DTI should you later begin shopping for a house.  And because they are falsely listed as open, they may stay on your reports for another 20 years, all the while getting older and older.  (The "open" status may prevent them from being removed at 10 years.)

On the other hand, if the report itself shows multiple lates (on the car account) then they are probably being counted multiple times by the scoring algorithm, as if you had two car loans and were late on each one.  "Summary" software has nothing to do with what the actual scoring algorithm is doing, so I wouldn't be too quick to be reassured by whatever it says.  What is the severity for the Auto lates and the mortgage late?  Are they classified as "Day 30" lates?  Are these your only derogs?  It is true that Day 30 lates, after enough time has passed, lessen in severity, so perhaps you are right not to worry about them.  Still (and this may be me just being OCD) I tend to feel like getting any derogs eliminated from your reports is a good thing to do.

Hopefully someone with far more experience with derogs can chime in.  I had a boatload of those 18 years ago but I basically just hid from creditors until they fell off.  This was all long before I learned about credit.  Yours are far fewer and may be very mild.

[Anonymous]

CGID - you were better at expressing my thoughts than I was!   I was thinking the good open reports were helping (the aint broke part) - they are all correct at zero.  

Hopefully this info will help clarify for anyone else who maybe more in the know:

The specific car loan shows correct on all 3 reports (I think it was 3 - 30 days) and zero balances - one report says open, other 2 closed

 - then under EX - same car loan (open date, amount etc) different number - zero balance - but the lates are here too

Mortgage lates - unfortunately we have 30-120 days during a mod we did.  Have to leave with these - but they are already 3+ years old and didnt stop us from getting some great approvals recently

We do have one mortgage that was transferred that shows open - payment status 'paid'.  Not sure how that factors in but worried me a bit.   Then it was transferred again and shows up again as open - payment status pays as agreed - last reported pymnt is 12/13.  Payment amount is incorrect as well.

Maybe I should get this all cleaned up?

Thanks

[RobertEG]

The status of an installment loan as open or closed is essentially irrelevant to credit scoring.

You still have the debt and a continuing obligation to pay, even if the loan has become delinquent, and you cannot increase your principal debt on an installment loan.

Closed has significance when applied to a revolving account, as it terminates the ability of the consumer to charge new debt, and thus increase the principal indebtedness.

It does have any such significance when applied to an installment loan.

Closed status will have effect years down the road, as date of closure is used by the CRAs to remove dead wood after approx ten years.

However, it does not have any current scoring implication.

[iv]

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@RobertEG wrote:

The status of an installment loan as open or closed is essentially irrelevant to credit scoring. 

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Not quite... closed installment loans don't help with credit mix.  So if the ONLY installments reported are closed, that's going to result in a lower score than otherwise.

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@RobertEG wrote:

 you cannot increase your principal debt on an installment loan.

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It's not unheard of for some LOCs to report on one or more CRA as installment loans, even though they function as a revolving line.

For that matter, various loan-modification programs can also increase the principal balance of the loan, while keeping the original tradeline.

[Anonymous]

I pulled 2 of my annual reports and the accounts listed on these reports appear more accurate.  I do have a transfered account appearing open but it that is all I have found so far vs using the compare all 3 function on CCT. 

As a note, I do have an open car and mortgage but all other installment loans are showing closed on the annual report.

[Anonymous]

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@iv wrote:

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@RobertEG wrote:

The status of an installment loan as open or closed is essentially irrelevant to credit scoring. 

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Not quite... closed installment loans don't help with credit mix.  So if the ONLY installments reported are closed, that's going to result in a lower score than otherwise.

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Hi iv!  I agree with you 100% that a profile with only closed loans does not have the same capacity for extra scoring points as one with at least one open loan.  And that's because the profile with an open loan has the capacity to get rewarded for being mostly but not entirely paid off (aka low installment utilization).

So I am definitely behind you in pointing that out.

But installment utilization is technically not a factor from the Credit Mix category.  It's from the Amounts Owed category.  So I think we don't have to go so far as to be certain that closed loans have zero help to the CM category as well.  That's a stronger claim, harder to prove, and not necessary for establishing the value of having an open loan.

Just a quick thought.

[iv]

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@Anonymous wrote:

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@iv wrote:

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@RobertEG wrote:

The status of an installment loan as open or closed is essentially irrelevant to credit scoring. 

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Not quite... closed installment loans don't help with credit mix.  So if the ONLY installments reported are closed, that's going to result in a lower score than otherwise.

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Hi iv!  I agree with you 100% that a profile with only closed loans does not have the same capacity for extra scoring points as one with at least one open loan.  And that's because the profile with an open loan has the capacity to get rewarded for being mostly but not entirely paid off (aka low installment utilization).

So I am definitely behind you in pointing that out.

But installment utilization is technically not a factor from the Credit Mix category.  It's from the Amounts Owed category.  So I think we don't have to go so far as to be certain that closed loans have zero help to the CM category as well.  That's a stronger claim, harder to prove, and not necessary for establishing the value of having an open loan.

Just a quick thought.

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Hi CGID - you seems to be conflating or confusing two different scoring factors.

One is the presence or absence on a report of OPEN installments.  This has an effect on Credit Mix. Closed installments don't help there, but a single open one does.

The other is the utilization of individual/total installment accounts (lower == better).  This has an effect on Amount of Debt, and has a greater effect on scores than the presence/absence of an installment in Credit Mix.

It may be difficult to separate the effects, given that having an open installment implies that there is also a reported utilization.  But if all installments are reporting as closed, the Credit Mix effect is lost, regardless of any reported balances (which stil count toward Amount of Debt, positively or negatively, depending on percentage paid).

For most people, the standard advice of "have one or more open installments with as low a utilization as possible (for as long as possible)" is all they really need to know, of course.

But if someone has ONLY closed installments, regardless of balances (if any), adding an open installment will still regain points (a small number, granted), in Credit Mix.

[Anonymous]

Hello iv!

I don't think I am confusing the factors that are involved in the benefit that one gets from an open installment loan (assuming the person had no installment loans at all, closed or open).  On the contrary, I was trying to carefully distinguish what those individual factors might be.  The loan will help you with installment utilization, which is a factor from Amounts Owed, and the loan will help you in the Credit Mix category

I realize that you believe that a person who has only closed loans gets no Credit Mix benefit from them, in any FICO model.  You were clear that this is what you believed earlier, and you have restated your belief here again.  What I am suggesting is that you might be mistaken.  I am certainly open to the possibility that you could be right, but I am wondering how we'd know that to be true. 

It's important to see that this is a much stronger claim than saying that having only closed loans won't give you the big benefit associated with a mostly paid down open installment loan.  There's no question about that, which was the point I was trying to make in my post to you. 

Just so we have a clear case in our mind, suppose we have Bob and Tom.  They have virtually the same profile (CC utilization of 3%, same AAoA, same age of oldest account, same age of youngest account, less than 25% of their cards reporting a positive balance, etc. etc.)  The only difference is that Bob has no installment accounts of any kind, closed or open, whereas Tom has a closed mortgage and a closed auto loan, each with a perfect payment history of 36+ months.  If I am hearing you right, Bob and Tom will have exactly the same score.  Tom will not get even one point for having these closed loans on his profile, and this will be true for all FICO models.

That may be true, but it's a strong claim, and it is unclear to me how we'd know it to be true.  It also feels nonintuitive, a surprising thing for FICO to do.

Anyway, that's what I was asking about.  Be glad to hear anything further you can tell me.  Best wishes...