Very confused about the Fico score

Anonymous · ‎09-05-2012

I really appreciate if anyone can help. I found that there was a collection on me about 4 months ago. There was a $560 medical bill that my insurance company agreed to pay the medical service provider but they had dispute and didnt pay it in time. I had no knowledge of such a collection on me. When I was contacted by the collecting agent 3 months after my visit to the ER, I promptly contacted the insurance and both of them told me that it had been settled between them. But 6 months after my medical service, the collecting agent reported me without me having any idea. The bill had been paid about 11 month after the service eventually. I tried to correct this for like 4 months and still cuoldn't get it solved. WHat's ridiculous is that this tiny bill dropped my Fico score from like 95% (around 820) to like 45% (around 700 or low). By now, all credit agents (Equifax, Transunion, and Eperian) still rank me over 90% but this Fico score using the same information from Equifax is 685 and transunion is 705. I wanted to do a refinance and this low score will cost me like half a point. I have already made direct contact with each agent but all they claimed is that the collecting agent had my birth date and SSN, and thus their report must be right.

I really don't understand two things: 1. Why is Fico score so much lower? The tiny amount of collection could cause so much damage to someone with perfect history over a long period. Even though Equifax and Transunion scored me on the top but with the same data FICO score is below average. 2. What can a consumer to protect myself? None of my protests with credit agents worked. How could someone have so much power to abuse my credit score and I couldnt do anything? I did consult a lawyer and he suggested that I should wait for 2 years to get back my credit score back and there is nothing else that I could do. It is not an option to sue either insurance or even the collecting company.

I would really appreciate any suggestions!

Confused Chuck

llecs · ‎09-05-2012

@Anonymous wrote:
1. Why is Fico score so much lower? The tiny amount of collection could cause so much damage to someone with perfect history over a long period. Even though Equifax and Transunion scored me on the top but with the same data FICO score is below average. 2. What can a consumer to protect myself? None of my protests with credit agents worked. How could someone have so much power to abuse my credit score and I couldnt do anything? I did consult a lawyer and he suggested that I should wait for 2 years to get back my credit score back and there is nothing else that I could do. It is not an option to sue either insurance or even the collecting company.
I would really appreciate any suggestions!
Confused Chuck

New collections can have a very large score drain especially on a clean report. Back in the day when we used to be able to pull our EX FICO score I had a collection appear on a clean report. Dropped my FICO 104 points overnight. Once removed, then my score rebounded. Recently on a clean report, I had a 30-day late added. That dropped my EQ FICO about 70 points. Baddies can hurt.

The balance of the collection doesn't matter. FICO ignores that. It doesn't matter if it's $0 or $10,000, the impact is equal.

FICO was largely developed with input from lenders. A lender is shy to lend money if they see a new collection added. In their mind, you are in recent financial trouble and that's why there's such a large ding.

Collections come and go all the time. I'd give your doctor or hospital (or whoever the billing medical provider was) a call and/or write and ask them to contact the collection agency to have the debt deleted. Some will. Explain to them that it wasn't your fault and explain it was a billing glitch that led to this collection reporting in the first place. Try this several times and keep an eye on your reports for any changes.

If after many tries and attempts, then send a GW letter to the collection agency (Example letters - PFDs, GWs, DVs, etc.). Very briefly explain what happened in the letter and ask for a deletion.

IMO, your lawyer isn't in the credit business. I'd ignore the advice. There are steps to take as mentioned above. Also, collections can hurt for the seven full years they report (from the DOFD of the debt), not just two years. But I bet if you were proactive in doing the above, you'll get it off within a month or so, or even less. BTW, suing is an option but you have to prove $$$ damages.

Anonymous · ‎09-05-2012

I too am confused and frustrated by the FICO scores. BTW - these credit bureau scores are useless and their credit "products" they want to sell you with their scores are a waste of money because lenders don't use their scores.

Since I purchased my first home in 1995 I have never been late on a mortgage. Since I purchased my first car in 1994, I have never been late on a car payment. I did have a few 30 and 60 day delinquents back in the late 90's when I went through a divorce, but all accounts have been paid and closed. I also entered a debt management program for about 18 months until I discovered that was crushing my credit score. I got out of the program an negotiated directly with the CC companies.

That was about 3 years ago and all accounts have been paid off. I have been very fortunate with my job situation and my compensation has continued to increase allowing me to pay off the debt sooner. When my score wasn't going up with no debt other than my mortgage and car payment, I decided to open a secured account in the amount of $5000. I keep a very small balance on that. I recently opened a credit card account (didn't have one) and pay the bill off every month. I don't carry a balance. The hope was to to show more available and unused credit. My score has improved only a few points.

We are looking to build an addition to our home next spring and I need to get my FICO score above 700 to get the good rate. I do have a $30 account that went collection. It was an oversight and was paid in March of last year. Would this one blip on my current report bring my FICO significantly? How can I get my score up in the next six months??

Anonymous · ‎09-07-2012

I really appreciate both of you. I will start with a GW letter to the service provider first. This system is really flawed and the consumer has very little right. Even after I told the credit agency that the collecting agent had record showing insurance agreed to pay. But they dont bother about it at all.