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Small-Balance Collections Accounts

Valued Member

Small-Balance Collections Accounts

Elsewhere on the myFICO website ("A look at FICO® Score 8 and why there are multiple versions of FICO® Scores") is this paragraph:

 

"Small-balance collections accounts
FICO® Score 8 ignores small-dollar "nuisance" collection accounts in which the original balance was less than $100."

 

That situation describes me precisely. I have an excellent credit report in every respect but one: a single $92 paid collection from Verizon Wireless, now two years old. According to the above statement, FICO Score 8 should ignore this collection account, and yet it has severely impacted my FICO score (by 90 points) and is listed as a contributing factor in every variation of my FICO score, including FICO 9. Why is this happening in view of FICO's policy above?

19 REPLIES
Moderator

Re: Small-Balance Collections Accounts

What are the reason codes and what are your scores?  Has the report been verified through annualcreditreports or similar as there's occasionally a difference in the monitoring services vs. the actual bureau main dataset.

 

Out of curiosity why are you picking 90 points?  850 - 760 = 90?  FICO doesn't work that way if that's what math you're doing, actually nearly if not outright impossible to get to a 760 with a collection on the report at least for FICO 8.

 

If you give a description of your file and the things in it we might be able to suggest some tweaks to it and whether the score you're seeing is reasonable; namely revolving tradelines and balances / limits / open date on all, inquiry count, and similar for your installment lines current balance / original balance and open dates.  Can skip the open dates other than for your oldest account if you know your AAOA offhand or have that from the MF service (it'll be close enough).

 

Starting Score: EQ 5 561, TU 98 567, EX 2 599 (12/30/11)
Current Score: EQ 5 771, TU 4 758, EX 2 758, EQ 8 795, TU 8 762, EX 8 786 (7/28/17)
Goal Score:    EQ 5 750, TU 4 750, EX 2 750, EQ 8 800, TU 8 Blah, EX 8 800 (01/01/18)


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Valued Member

Re: Small-Balance Collections Accounts

My TransUnion credit report (the only one I purchased) does not show a 'reason code.' The item is described as "Payment after charge off/collection." The "largest past balance" is $92, which is accurate. That is the amount of the charge off and my payment after the charge off. It is described in my FICO Score 8 Summary as a "serious delinquency (60 days past due or greater)."

 

Prior to this item's appearance on my credit report, my FICO score was 805. When this item was first reported, 26 months ago, my FICO score plunged to 624. It now stands at 714 -  that's 91 points below its former level.

 

This item is the only negative item on my entire credit report. According to the myFICO website, since this item is clearly less than $100 it should be "ignored" in my FICO Score 8.

 

Whom at FICO or TransUnion may I contact for an explanation of why this item has not been ignored?

Frequent Contributor

Re: Small-Balance Collections Accounts


BulldogX wrote:

My TransUnion credit report (the only one I purchased) does not show a 'reason code.' The item is described as "Payment after charge off/collection." The "largest past balance" is $92, which is accurate. That is the amount of the charge off and my payment after the charge off. It is described in my FICO Score 8 Summary as a "serious delinquency (60 days past due or greater)."

 

Prior to this item's appearance on my credit report, my FICO score was 805. When this item was first reported, 26 months ago, my FICO score plunged to 624. It now stands at 714 -  that's 91 points below its former level.

 

This item is the only negative item on my entire credit report. According to the myFICO website, since this item is clearly less than $100 it should be "ignored" in my FICO Score 8.

 

Whom at FICO or TransUnion may I contact for an explanation of why this item has not been ignored?


Good Morning BulldogX,

 

Where did you get your FICO 8 score from?  Was it from TU's website, or here on MyFICO's website?  I ask because I see that you've mentioned MyFICO as well as TU's website.  If your score came from TU's website, then that is not a FICO score, but rather a VantageScore.

 

Thanks in advance.


Starting Score: EQ 593, TU 600, EX 612
Current Score: EQ 838, TU 850, EX 847
Goal Score: EQ 750, TU 750, EX 780


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Valued Member

Re: Small-Balance Collections Accounts

My FICO 8 score was purchased on this myFICO website with TransUnion's credit report being the basis for the score. This is unquestionably a FICO 8 score.

Frequent Contributor

Re: Small-Balance Collections Accounts


BulldogX wrote:

My FICO 8 score was purchased on this myFICO website with TransUnion's credit report being the basis for the score. This is unquestionably a FICO 8 score.


Oh ok.  What were the other factors listed?  And, what is your AAoA, Util, INQs, etc?  That way we can get a fuller picture


Starting Score: EQ 593, TU 600, EX 612
Current Score: EQ 838, TU 850, EX 847
Goal Score: EQ 750, TU 750, EX 780


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Valued Member

Re: Small-Balance Collections Accounts

Those other abbreviations that you mentioned have nothing to do with my question.

 

The explanation given for my FICO 8 score cited a paid collection for $92 as a negative contributing factor in the calculation of my FICO score. According to FICO's policy, paid collections less then $100 are not considered in the calculation of a FICO score. Why was my $92 paid collection cited as a negative contributing factor in the calculation of my FICO score?

Moderator

Re: Small-Balance Collections Accounts

Wait, is there a tradeline which was charged off leading to a collection?

 

The CO is counted if so, the $92 collection is independent of that.  One's in the tradeline data as a delinquency, a collection is scored like a public record.

Starting Score: EQ 5 561, TU 98 567, EX 2 599 (12/30/11)
Current Score: EQ 5 771, TU 4 758, EX 2 758, EQ 8 795, TU 8 762, EX 8 786 (7/28/17)
Goal Score:    EQ 5 750, TU 4 750, EX 2 750, EQ 8 800, TU 8 Blah, EX 8 800 (01/01/18)


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Frequent Contributor

Re: Small-Balance Collections Accounts


BulldogX wrote:

Those other abbreviations that you mentioned have nothing to do with my question.

 

The explanation given for my FICO 8 score cited a paid collection for $92 as a negative contributing factor in the calculation of my FICO score. According to FICO's policy, paid collections less then $100 are not considered in the calculation of a FICO score. Why was my $92 paid collection cited as a negative contributing factor in the calculation of my FICO score?


Just my 2 cents, so take it at what it worth:

 

From http://dailydollarnewsletter.com/2012/03/20/do-collection-accounts-under-100-hurt-your-credit-score/

 

==

Per the FICO 8 product fact sheet the $100 and under exclusion applies to third party collection accounts, but not to lender collection accounts. In other words if a collection agency that is collecting on behalf of the original creditor has a debt of under $100 it will not be included in the FICO score calculation. If the collection is reported by the lender (for example a department store like Target or Kohls) that has their own in-house collections, the debt will not be ignored.

==

 

So is the collection listed on your report by a 3rd party collector, or is this from Verizon Wireless?

 

Also, part of our FICO scores are payment history.  This is 35% of our score- regardless of the FICO model being used.  So, I am not sure of the percentage "of the 35%" that a collection might actually take up- as I am sure that none of us are aware of that because of the proprietary algorithms used to make up our scores.

 

Perhaps FICO has to list it as a contributing factor even if it is not factored?  I know that doesn't make any sense, but just saying.

 

I do not know the answers to these questions, and that was why I asked you my original questions of the other things on your report.

 

You may want to contact MyFICO support on their published number for more guidance.  My experience recently is that they were very helpful with an issue that I was having.

 

Phone:
1-800-319-4433
Mon - Fri 6am to 6pm Pacific Time
Sat 7am to 4pm Pacific Time

 

I wish you the best in finding the answer to your question.

 

 


Starting Score: EQ 593, TU 600, EX 612
Current Score: EQ 838, TU 850, EX 847
Goal Score: EQ 750, TU 750, EX 780


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Valued Member

Re: Small-Balance Collections Accounts

Thanks for your reply. I actually did contact myFICO support and am waiting for their answer.

 

The quote I cited from the myFICO website doesn't distinguish who is doing the collection or what type of collection it is. It's very simple and straightforward: Less than $100, not counted. I was afraid there would be a 'catch.'