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I thought they made revisions to the FICO scoring model so you will not be penalized for paying a collection or charge off account.
Can anyone confirm this.
@sjt wrote:I thought they made revisions to the FICO scoring model so you will not be penalized for paying a collection or charge off account.
Can anyone confirm this.
I am not sure about any revisions to the FICO numerology model.....What I do know is in my case I had a charege-off unpaid account reporting late each month for the last three years....Thus the recent activity was current. I decided to pay this small debt off. Now we will see if this has any effect on my score, for the better. I really hope it does.
I am not sure with Fico, but believe where Credit goes Fico goes. I found that going back and paying off charge offs or write offs, will impact you in a negative way as does Credit cpanies who say they will clean it up, so you can secure a higher score. I lost 35 points from Credit repair and paid off 8 charge offs equal to $9000, it dropped another 40 points. After investigating an attorney told me paying off charge offs will only activate the count again reflecting the bad credit score... I will have the other two charge offs paid off, once non credit score is high enough enough to take the drop, but still be credit worthy.
Sorry for long reply...
Bob
100% Disabled Veteran....
I think it varies.
If there is a charge off that's reporting against your revolving accounts still with a past due, then it's affecting your uitilization and thus if you pay it off, you take a hit on activity but you still help yourself with utilization.
Since utilization > activity, i think it's a win. But just for that case.
From the confusion in what you have read, both here and elsewhere, I think the definitive answer is that there is no definitive answer.
I can opine all I want about what makes or doesnt make sense, or about what the FICO algorithm does with scoring of collections and COs, but absent any specific statement from brother Fair, nothing is definitive.
Being a risk of becoming delinquent analysis, it only makes sense to me that a collection or charge-off should be scored in impact based only on the adverse item that created its reporting.... the DOFD. Later activity has nothing to do with that issue, and thus should not affect its impact regarding its adverse scoring.
However, others swear that both updating reporting and payment or non-payment have effect. Much of that may be due to overlooking other changes that occured in their report, but the anecdotal posts seem to indicate an effect.
In my opinion, the real benefit lies beyond simple scoring. The presence of old, unpaid debt is absolutely a negative in any manual review of a consumer's credit report, and even after the adverse item has been excluded from one's CR, it may still be discovered by subsequent creditors via other means.
Looking at the bigger picture, outside of damage to the wallet, it is always better, in my opinion, to be able to answer No, I have no unpaid delinquent debt, regardless if its CR inclusion or exclusion.