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Posts: 1
Registered: ‎12-28-2013
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Default and Debt to Income Question

I understand a very high percentage of your credit score has to do with available credit vs credit used.  I also understand that Debt to income plays a large part in scoring or evaluating a loan. While defaulting is extremely detrimental and damaging to a credit score, after the 180 days and it is charged off does it not begin to show an improvement as the credit usage has been defaulted, debt to income has been reduced. Well not reduced, I guess. Maybe I answered my own question.  Someone word this better for me please...

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Posts: 22,406
Registered: ‎01-17-2008
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Re: Default and Debt to Income Question

Yes, that is utilization but only applies to revolving credit in a big way.

 

DTI is not a scorable factor in a FICO score but is looked at by lenders.

 

No, once an account is CO'd it will impact your score for the 7 - 7.5 years it is there.  A CO is an accounting term only and does not mean the debt is still not owed.

 

If it is a CC debt that is CO'd, the creditor has the option to sell the debt to a CA or just assign it.  If it is sold, the balance will be 0, the CL is removed and it will not impact your utilization.  If it is just assigned, the balance will remain on the OC account.  If there is also a CL reported, that account will factor into your utilization until the debt is paid to 0 then will forever be removed from your utilization.  It will remain and factor into your AAoA until the account is excluded from your CR.

 

If the debt is sold but no collection agency is reporting the debt, the CO will still impact your score.

 

On an installment account, same thing.  If the debt is sold the balance on the OC account will be 0.  But there may be a CA reporting the debt.

 

The only way for it not to impact your DTI would be the original creditor showing a 0 balance and no CA or other lender/buyer reporting the debt. 

 

 

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