09-24-2010 07:54 PM - edited 09-24-2010 07:56 PM
In preperation for applying for a mortgage, I decided to take care of a utility bill that had went into collections 2 years ago.
Before paying the bill, I scoured the MyFico forums and the consensus was that paying the collection off wouldn't increase my credit score, so I wasn't expecting that (I had already attempted a PFD; it was rejected). I just wanted it to show as being paid to the mortgage lenders.
Prior to the payment, my TU score was 627 and my EQ score was 630 (pulled through MyFico). I paid the utility collection in full and about a week later, I received a Score Watch alerting me to a change in my EQ credit score. When I logged in, my EQ score had dropped to 587!!!!!! I immediately pulled a full EQ report and the only change was that the status of the collection account had changed from upaid to paid. However, the "scales" listing what's affecting your credit report negatively stated that I had a recent collection within the last month!!! However, the paid collection is the only thing that's listed!
I completely freaked out!!! I immediately pulled a TU report as well and my TU report also showed the collection as paid but my TU score increased from 627 to 632.
I thought the new FICO scoring system was suppose to be able to differentiate between activity on an old collection and a brand new collection???? I immediately called up Equifax to figure out what happened and was told that the utility tradeline had been deleted.... Huh???? I pulled a 2nd EQ report and sure enough, the utility collection had be deleted but my EQ score had only increase to 598 and the scales were still stating that there was a recent collection within the past month.
What happed here???? When can I expect my EQ score to rebound????
09-24-2010 08:22 PM
I had heard that paying an old collection would update the date of last activity which would lower your credit score. My loan officer freaked when she heard that I had paid a six year old collection at my mortgage processors request. Luckily for me, the CA was already updating my credit report monthly so my score shouldn't drop. Even luckier, I got a PFD agreement in writing prior to paying and a acknowledgement of the agreement immediately after I paid them. I'm just hoping it comes off before the final credit pull before closing. The CA was RJM Acquisitions. From what I have read on these boards, they are pretty true to their word and will actually delete. As of now, I'm still waiting.
09-24-2010 08:53 PM
Why would a loan officer "freak" at you having met your obligation to pay an old debt?
Does she know your state civil procedure code, and thus know that you have a valid SOL defense should the CA bring legal action?
Some states provide for reset of your SOL for any prior payments, and some for just making offers to pay.
09-24-2010 09:23 PM
She freaked because my credit score is marginal for a loan. My mid score is 671. I am in Minnesota, and the SOL has passed. The DOFD was actually in 2004, and this was scheduled to drop off in 2011. The amount was small enough that I could afford to pay it. The CA only recently started reporting it on my Experian and Trans Union reports, and they never contacted me about it - which is why I hadn't paid it before now. Before I paid it, I contacted OC to verify that this was for what I thought it was for and that the amount was correct. It appears that the CA tacked on $30 for "processing" or whatever. RJM is actually not a CA, they are a debt purchaser. They now own the debt - this is what all the communication from them states. It was my only collection account - and now it is paid. I'm very happy about that anyways. I did PFD - got it in writing from RJM.
From what I can tell, the process for obtaining a mortgage is quite different from any other kind of financing. It is quite complicated. My LO sent me a flyer telling me what not to do while my loan is being processed. Paying old collections was one of them. The processor told me that the collection had to be paid. She underlined it just like that - so I paid it. The PFD was for my (credit) protection. UW wanted a letter of explanation, and now I can tack on a letter from RJM stating that my debt was satisfied in full. Seems like a good thing to me. Unfortunately, credit scoring models don't see shades of grey, it's either black or white to them. An updated DOLA is black. They see it as a new collection every time DOLA updates. Stupid - I know, but who can argue with an algorithm?
09-25-2010 01:41 AM
There were no other changes to my credit report in other scoring categories.
And the DOLA for the collection account appears to not have change (still listed as March 2008). What has changed is the date it was last reported (those two things are listed seperately on the report, so I'm assuming they're two different things??)
My biggest concern is this: if EQ deleted the collection tradeline, why is it continuing to state that my most recent collection/late payment was a month ago? Does this mean that the FICO formula is still using information to calculate the score that's no longer listed in the credit report?
09-26-2010 05:57 AM
Thanks to everyone on this forum!!
I decided to send 12 (yes, 12!!) GW emails to various people (including the CEO) at the reporting CA explaining what happened and that their tradeline was putting my mortgage approval in jeapordy. The next day (!!!!), the tradeline was deleted from EQ and TU; I haven't pulled EX yet, but my hope is that it's been deleted from there as well.
I have no more collections on my credit reports now!!!