New Collection Placed - Older Item... Big Hit to FICO scores...?

[Anonymous]

Hello,

A new colleciton was plced on my account recently for a total that I recognize, $1,300.  The total itself is the only reason I recognize this account.  It's related to a previus debt which occurred in 2014.  That being said, This has shown up in myFICO with the following message

"A new collection has been added to your credit report

FICO® SCORE CHANGE"

The score damage is significant, a drop of over 30 points on one of my CRA's and in the 20's on my other two.  The problem is, this debt was clearly purchased but is not new.  Is this the JDB trying to get my attention and scare me into paying or is this how scores actually react when debt is sold?

Thank you very much in advance.

[RobertEG]

It is likely both.

Debt collectors use credit reporting to get a consumer's attention.  It is a legitimate collection practice.

Additionally, reporting a new or updating a previously reported collection is a reporting that, as of that date, the debt remains delinquent and unpaid.

It thus effectively lengthens the of-record period of delinquency, which then impacts scoring.

[Anonymous]

I guess my problem and question is, can they show it as a new collection?  Shouldn't it be an updated collection with the previous collections removed?

Does this mean if a debt is sold, every time, I take a massive hit to my FICO score?  Is that how it should work?

[RobertEG]

The CRAs have a policy instructing a debt collector to delete their reported collection if their collection authority is terminated and the debt remains unpaid.

The intent of the policy is to preclude the simultaneous reporting of mutliple collections on the same debt.

Since a new debt collector has the right to report their collection once they obtain collection authority, regardless of whether it was previously reported by another debt collector, the burden is imposed on a prior debt collector to delete once their collection authority is terminated.

[Anonymous]

I understand the logic of your statement but here is what I don't understand...

Every time a debt is sold, it becomes a "new" debt and thus they can sell it a dozen times, tanking someones credit score?

This seems illogical by the definition of "new debt".

[tufa4311]

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@RobertEG wrote:

The CRAs have a policy instructing a debt collector to delete their reported collection if their collection authority is terminated and the debt remains unpaid.

The intent of the policy is to preclude the simultaneous reporting of mutliple collections on the same debt.

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By "delete thier reported collection" do you mean they need to delete all their reporting history they have for you or just the months that the account was in a specific status? For example, if credit card A has 2 years of reporting, some of which are lates, then they sold it to Card B, does card A need to delete all their reporting including the lates - basically Card A would no longer be on your credit report?

[RobertEG]

Reporting by an original creditor includes your payment history under your credit card agreement with them.

That history remains when the debt becomes delinquent and is assigned or sold to a debt collector.

The OC account reporting plus any reporting by the debt collector can both be included concurrently in your credit report.

The CRA deletion policy only applies to reporting by debt collectors, not original creditors.

Thus, if a new debt collector obtains collection authority (either by way of assignment from the current owner, or by way of their purchase of the debt), the prior debt collector must delete their reported collection.  However, the OC account is not affected, and the history of monthly delinquencies and/of  charge-off remains.

[tufa4311]

I see - it's the difference of creditors and collectors. Thx

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@RobertEG wrote:

Reporting by an original creditor includes your payment history under your credit card agreement with them.

That history remains when the debt becomes delinquent and is assigned or sold to a debt collector.

The OC account reporting plus any reporting by the debt collector can both be included concurrently in your credit report.

The CRA deletion policy only applies to reporting by debt collectors, not original creditors.

Thus, if a new debt collector obtains collection authority (either by way of assignment from the current owner, or by way of their purchase of the debt), the prior debt collector must delete their reported collection.  However, the OC account is not affected, and the history of monthly delinquencies and/of  charge-off remains.

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