11-09-2012 06:44 PM
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.
The real benefit is with the scoring.....I would argue the scoring model has become a part of our Defensible Space. After all, the score was created to predict negative behavior....I for one want to understand all that which has a say in my life and demand more government regulation and oversight. With this said, the presence of old unpaid debt could be a clear understanding of how the scoring model works. If I were a lending, I would want someone with one charge-off versus someone who has filed bankruptcy....but the scoring model does not reflect that, right?
11-10-2012 06:07 AM
Paying off any debt has its good and bad. First, as far as the scoring, it will initially decrease due to it resets the seven year clock and now becomes a current bad debt,, but will show paid. The impact of the "new" debt will decrease more rapidly as time goes on than a unpaid one.But your starting at the beginning again. The only way to really pay a debt that is more than 3 years old and be in your best interest, is get a WRITTEN agreement for the debt holder to delete your listing in exchange for agreed payment in full. Otherwise, you are better off not paying and wait for the seven years when it must be removed by law. The system is flawed where it discourages responsibility.
11-10-2012 07:54 AM
11-10-2012 11:56 AM
It absolutely does not reset the date of its credit report exclusion, period. Of that, there is no debate.
The credit report exclusion periods set forth in section 605(a) and (c) all, with the exception of unpaid tax liens, expire after a set date from the relevant adverse information being considered, not later account dates and reporting.
A charge-off or collection must be excluded from a consumer's credit report after 7 years plus 180 days from the DOFD on the OC account.
02-12-2013 06:23 AM
Split post to form a new thread within Rebuilding Your Credit