Understanding FICO® Scoring

[Drew]

I was overlooking the FICO chart and noticed something peculiar.  It says that "amounts owed" is 30 percent of your credit score.

I was wondering if settling collection accounts decreases the "amounts owed" on your credit report, in turn raising your FICO score?  Can anyone contribute some knowledge about this?

[Drew]

Bump.

[Justin_Bailey]

By "Amounts Owed" they are really talking about credit utilization. Since a collections account isn't technically utilizing anything (you could call it a "dead" account), paying it off doesn't do anything to help your utilization. Once an account goes to collections, the only thing you can do is wait 7 years for it to get off your report.

[Drew]

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Justin_Bailey wrote:
By "Amounts Owed" they are really talking about credit utilization. Since a collections account isn't technically utilizing anything (you could call it a "dead" account), paying it off doesn't do anything to help your utilization. Once an account goes to collections, the only thing you can do is wait 7 years for it to get off your report.

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I'm not sure about that because the account summary section says "account balance", and that includes open and closed accounts.

[okrogius]

"By "Amounts Owed" they are really talking about credit utilization. Since a collections account isn't technically utilizing anything (you could call it a "dead" account), paying it off doesn't do anything to help your utilization. Once an account goes to collections, the only thing you can do is wait 7 years for it to get off your report. "

Amounts owed does include utilization and it's a major portion of it, but that's not everything. For instance how many accounts have balance is a factor.

The note about collections is wrong - a collections account can still count in utilization. And only thing you can do is wait 7 years is at best a very pessmistic passive view, especially if the information is incorrect.

[Drew]

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okrogius wrote:

Amounts owed does include utilization and it's a major portion of it, but that's not everything. For instance how many accounts have balance is a factor.

The note about collections is wrong - a collections account can still count in utilization. And only thing you can do is wait 7 years is at best a very pessmistic passive view, especially if the information is incorrect.

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That's what I was thinking.  If I pay charged off acounts still delegated by the original creditor, than I would think my "amounts owed" would drop to $0 a balance.

I was hoping that would then help out my FICO score somehow.

Message Edited by Drew on 04-11-2007 06:34 PM

[Justin_Bailey]

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okrogius wrote:

Amounts owed does include utilization and it's a major portion of it, but that's not everything. For instance how many accounts have balance is a factor.

� 

The note about collections is wrong - a collections account can still count in utilization. And only thing you can do is wait 7 years is at best a very pessmistic passive view, especially if the information is incorrect.

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Well obviously if the info is incorrect you can do something, but other than that, what else can you really do about a charge off/CA? You can try and get them to remove it after you pay it off I guess, but I haven't heard many success stories about that.

How much does a CA count towards your utilization? Does it count as a maxed out card? If so, then why does it not seem to affect your score when you pay them off?

http://finance.yahoo.com/expert/article/mortgage/25603

"Will Paying Delinquent Accounts Improve Your Score?

No. Delinquencies reduce your credit score because they're viewed as evidence of a weak commitment toward meeting your obligations. This evidence of your attitude toward debt is not wiped away when you repay the delinquent loans. They stay on your record for seven years. However, their weight in your credit score gradually declines with the passage of time, provided your recent payment record is better. "

[okrogius]

As far your utilization a CA account counts as an account with a balance and 0 credit line, revolving - typically.

The yahoo article is incorrect (although for the most part it is right). Paying an account can have an impact on utilization. However, the major hit is from a CA being there. Paying thus can increase the score, but very very slightly.

With respect to what you can do otherwise - even if you do have a chargeoff, most CA agencies violate respective debt collection laws. Take advantage of your rights, and document their breaking of those laws. If you give enough of a reason for a CA to not report your information (e.g. that's the only way they're getting money out of you for the debt, that way they're not getting sued over their own fallacies, etc), most will be happy to oblige.

Message Edited by okrogius on 04-14-2007 11:44 PM

[Drew]

Okay, so what happens if I have one two revolving accounts with a $0 balance and 8 paid charged off accounts?

How would a creditor see something like this and what should my score look like?

[LadyFICO]

Way too many factors to say what your score would look like. Do you have any recent scores? Then some of the veterans can give  you some of their experiences? Anyway granting you credit is still at the discretion of the lender. I say that to say my scores are low do to ignoring the importance of good credit. Last Oct and Nov paid off two collections and paid credit cards on time still had o/s charge offs of 1200. I paid all of them in early March some have been deleted because of age and the rest are paid. Score went up only 25 points from nov to feb then after paying all collections and having some deleted went up another 47. My score is still low but by reading forums i decided to get a debt consolidation loan at first they were leary due to low score but they saw that I paid everything off (old co and ca) and took a chance. Score is important if you don't want  to fight for things but some creditors that still have humans doing loan applications will look at what you are doing to improve your standings. I was approved and have recently paid all below 25% most below 10% I am waiting to see the effects of the new loan now an installment and the cc going from maxed to 10% util range.