@Anonymous wrote:
@Lel wrote:
When accounts are disputed, certain aspects are excluded from scoring, but not all of them. Financial/payment data are excluded - for example, balances and payment history. However, non-financial aspects, such as date of account opening (and its effects on average age of accounts) are still included in scoring.
ETA: sorry, I should have included my theory about why your score went down. If that was your only account with derogatory comments, then you've probably been temporarily rebucketed into the no-derogs scoring group.
I am confused, if what you say is accurate then why would my score go down given all my history i described in the original post?
Okay, I'm going to try to do something that I've never done before: try to explain the concept of scoring "buckets". As a disclaimer I have to admit that my understanding of this topic is quite limited.
The FICO scoring algorithm recognizes the fact that it's not possible to put everyone with a credit file into a single group and generate scores that would be inherently fair or accurate. That is, a person who has just turned 19 and obtained his or her first credit card can't be put in the same group as the person whose credit history spans 40 years, has multiple credit cards, a mortgage, and an auto loan or two.
Here's an analogy - but I don't know if it's any good. Think of a community 10k race. There might be 5000 runners, ranging in age from 8 to 80. A thirtysomething former college cross-country runner might win the race, whereas the 8 year old will be far behind. Do you tell the 8 year old, "sorry, you finished #4873"? Or do the race organizers create separate categories that recognize the level of accomplishment for different classes of runners?
FICO scoring does something similar. However, it's not just limited to the length of someone's credit history. They also group people according to what's on their credit reports. For example, two people might have credit histories of 20 years. One person has credit cards, a mortgage, and an auto loan. The other has just had credit cards. These two persons can't be completely compared to each other, so they would be placed into different scoring buckets, in which their scores would based in part by how they compare to their credit "peers". If these two people were scored in the same bucket, then the CC-only person might never be able to achieve a high credit score because he would never have the same mix of credit as the person with multiple account types.
From what I've gathered over the past few years, there are lots of buckets encompassing lots of different aspects. I suspect that there's a lot of overlapping buckets, sort of like a giantic Venn diagram. One of the buckets defines whether you have derogatory accounts or not.
Before you disputed your one derogatory account, you were in a bucket that included others who had derogatory accounts. Your credit history was factored into the scoring algorithm for persons in this bucket. The formula saw that yes, you have an account that was reported as negative nearly 5 years ago. It also saw that since then, you've been a good steward of your credit. Over time, your score has improved and you compare favorably against others in the bucket.
Now that you've disputed your account, the negative payment history is being excluded from scoring. In the eyes of the FICO algorithm, you no longer fall into the consumers-with-derogatory-accounts bucket. You've been rebucketed into a pool of persons who have no derogatory accounts on their report. The persons in your new bucket are "graded" by FICO on a somewhat tougher scale. Your credit report, which was good for a 686 in the other bucket, is now only good for a slightly lower 680 in your new bucket.
This is not to say that you made a mistake by disputing, because of the effect on your credit score. If there is something truly incorrect on your credit report, then it is logical to dispute it. Eventually, as you continue on in your new bucket, your scores should hopefully improve.
I hope I got this right about buckets. If not, someone will correct me soon.
