Is delinquency (but NOT derogatory) the SAME as derogatory (charged off, collection, etc.)?

[striders]

I have a car loan in 2005 that I have been paying until 2008 (the height of economic crisis), where I was laid off and unable to make payment. It was reported that I was late for 120 days. But by the following month, I got a new job and paid all the missed payment, late fees, etc. to bring the account current. Afterwards, I kept paying the car loan for the next 12 months, as normal. By the 13th month, I sold the car and got a used one (no financing) since I live only 0.2 miles away from my office. At this time, I have multiple credit cards, all unsecured with large credit. I haven't been applying for another credit card or car loan because I don't need to.

Fast forward to today (2014), I tried to apply for a new Citibank card because I want to get cash back (none of my cards does, only points). I was declined and the reason is because of a "delinquency". I was surprised and called Citibank and was told is because I have a late payment in 2008.

I understand that derogatory account, like collection or charged off will damage my credit and stay for 7 years. But the car loan above is not in this state, as a matter of fact, it is shown as "paid in full". 

So is deliquency is counted the same as derogatory account that will last for 7 years? I am curious because I DID try to fix the situation and ended up paying off the car loan, with good payment history 12 months after the deliquency. Seems like I am being counted by FICO as someone who have a repo'ed car loan, which is clearly worst than just late payment.

[DaveSignal]

A 120-day late is a major derog, and hurts your score significantly for the entire time it is on your reports. You could try sending goodwill letters asking the lender to remove the late payments. If this doesn't work, the lates will fall off approximately 7 years from the date of first delinquency (DOFD). At that point, the account will turn positive and will remain as a positive installment for approximately 10 years since your last activity.

[striders]

Dave,

Thanks for the information. So I was right that deliquency is the SAME as collection or charged-off account, even after I bring the account current for 1 year and eventually pay it off.

TBH, I am a bit disappointed that FICO did this. I mean, the advice that I get is always try to work with the bank, bring the account to current status and dont let it go into collection. So I did my best to bring the account current and kept it for 1 year, eventually paying it off in full. This account show something like this in my credit report:

<since 2005>.. OK OK OK OK 30 60 90 120 OK OK OK....<for the next 12 months>

Have I known that FICO will do this, I would have let the car get repo-ed, because repoed = 120 days deliquency and will last 7 years anyway, but at least it will save me tens of thousands of dollars in cash (I brought the account current, paid the loan as normal for the next 12 months AND then pay it off).

On a sidenote: I did try to call the bank back in late 2009 to have the late notice removed, but the bank said the loan is paid in full, so the account is closed and there is nothing to report.

[DaveSignal]

You are right that a charge-off and a 120-day late are similar, but with a charge-off / repo, there would still be the 120-day lates plus the charge-off status (account will never turn positive). Additionally, a CA would probably open a new collection account to get the rest of the money owed.

You could try sending more GW letters, sometimes it takes a few.

If this 120-day is the only baddie on your report and it is old, your FICO can still improve enough to qualify for the majority of credit cards/loans. It helps to have other positive accounts, but if you think the last card that denied your application for credit was unwarranted, call them back and ask for reconsideration.  If that doesn't work, post your FICO score and some credit report details in a new thread on the credit cards forum. Other members there will let you know exactly the cash-back cards for which you are most likely to be approved.

[RobertEG]

When an account is in a derogatory status, be it a monthly delinquency or a CO, that remains its current status until it is returned to current status of OK/Pays as Agreed (or Paid in full if paid and closed)

If the account is then returned to good standing, there is some shifting that occurs.

Current status is simply a snapshot of the last reported account status.  It retains no historical memory of prior delinquency status.

The delinquency status prior to its return to good-standing is then retained under a separate code called the Payment Rating, which in your case would have been 120+ late.

Current status is then OK/Pays as Agreed.  Payment rating becomes 120 late.

Thus, prior derogs are not simply over-written when a satisfactory current status occurs, they are retained.  Current status tells nothing of the prior levels of delinquency.  The prior derogs will still show in your credit report.  And, of course, the prior delinquencies by month are still retained in your Payment History Profile for determineation by the CRA of when they are scheduled to be excluded.

There is nothing imcorrect in showing Paid in Full and still showing the highest level of prior delinquency, and the individual monthly delinquencies.

It is only a matter of what cubby-hole the credit report extracts the info from.

DOFD is immaterial to the max exclusion date of a monthly delinquency.  It's exclusion date is 7 years after its reported month of occurence.

[guiness56]

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@DaveSignal wrote:

You are right that a charge-off and a 120-day late are similar, but with a charge-off / repo, there would still be the 120-day lates plus the charge-off status (account will never turn positive). Additionally, a CA would probably open a new collection account to get the rest of the money owed.

You could try sending more GW letters, sometimes it takes a few.

If this 120-day is the only baddie on your report and it is old, your FICO can still improve enough to qualify for the majority of credit cards/loans. It helps to have other positive accounts, but if you think the last card that denied your application for credit was unwarranted, call them back and ask for reconsideration.  If that doesn't work, post your FICO score and some credit report details in a new thread on the credit cards forum. Other members there will let you know exactly the cash-back cards for which you are most likely to be approved.

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Not necessarily true.  The only thing that has to be removed is the CO annotation.  If it is and the OC leaves the account, it would then become positive.

[DaveSignal]

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guiness56 wrote:

Not necessarily true.  The only thing that has to be removed is the CO annotation.  If it is and the OC leaves the account, it would then become positive.

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Thanks for the input.  What I meant though is that having 120+ lates is one thing to have to get removed in order for the account to turn positive.  Having 120+ late and a CO status requires 2 separate things to be removed in order to turn positive, plus there is likely also a 3rd thing: a collection account to work on getting removed.

ETA:  In my experice, an account with CO status will be deleted after 7 years, rather than changing positive, but I guess you are saying that the OC can opt to turn it positive?  Does this work without asking?

[striders]

This particular account is a car loan and it is now in positive status and closed, but still considered deragotary due to 120 days late payment. However, since it is in positive status, how would that get removed in 7 years? I though only negative account get removed in 7 years.

Also, if this happen to be a credit card account and I keep it open, does this mean the account will be in deragotary status indefinitely?

[DaveSignal]

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@striders wrote:

This particular account is a car loan and it is now in positive status and closed, but still considered deragotary due to 120 days late payment. However, since it is in positive status, how would that get removed in 7 years? I though only negative account get removed in 7 years.

Also, if this happen to be a credit card account and I keep it open, does this mean the account will be in deragotary status indefinitely?

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 No.  You are being penalized right now for having an account with 120+ late payment history. Regardless of what the current staus is, it is graded as a derogatory.

But, since the current status is positive, your 120+ late payments will be removed after 7 years rather than the whole account being deleted.  A positive account with current status and good payment history will then remain on your credit reports.

[guiness56]

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@DaveSignal wrote:

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@guiness56 wrote:

Not necessarily true.  The only thing that has to be removed is the CO annotation.  If it is and the OC leaves the account, it would then become positive.

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Thanks for the input.  What I meant though is that having 120+ lates is one thing to have to get removed in order for the account to turn positive.  Having 120+ late and a CO status requires 2 separate things to be removed in order to turn positive, plus there is likely also a 3rd thing: a collection account to work on getting removed.

ETA:  In my experice, an account with CO status will be deleted after 7 years, rather than changing positive, but I guess you are saying that the OC can opt to turn it positive?  Does this work without asking?

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True, however, by the time the 7.5 years has passed for the CO annotation to be removed,  it is more than likely the 120 days has passed the 7 year mark also. 

The 3rd party collection is a separate issue but,  since that too is required to be removed based on the DoFD of the OC account, it would be gone at the same time as the CO.

FCRA says that the CO or collection, or like item, will be removed no later than 7.5 years from the DoFD.  So, if an account is CO'd only that annotation will be removed.  Likewise, if the OC account is listed as collections, that too would be removed.

Only the OC can decide whether to continue reporting the TL after the CO is removed.

It is all done automatically with no requests from the consumer.   I have seen it go both ways.