Understanding FICO® Scoring

[Tuscani]

http://articles.moneycentral.msn.com/Banking/YourCreditRating/WeirdStuffThatHurtsYourCredit.aspx?GT1...

[mattwarner]

From the article:

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Settling debts

In the latest versions of the FICO formula, score creator Fair Isaac Corp. fixed a glitch that often penalized folks for paying old debts that had been charged off and sent to collection agencies. (See "When paying old bills can hurt your credit.")

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Really?

[MidnightVoice]

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In the latest versions of the FICO formula, score creator Fair Isaac Corp. fixed a glitch that often penalized folks for paying old debts that had been charged off and sent to collection agencies. (See "When paying old bills can hurt your credit.")

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I wonder what score-reducing "glitch" they replaced it with 

Message Edited by MidnightVoice on 05-18-2007 01:55 PM

[Tuscani]

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mattwarner wrote:

From the article:

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Settling debts

In the latest versions of the FICO formula, score creator Fair Isaac Corp. fixed a glitch that often penalized folks for paying old debts that had been charged off and sent to collection agencies. (See "When paying old bills can hurt your credit.")

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Really?

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I believe so.

[mattwarner]

Do I correctly understand this to mean that paying a collection agency will not hurt my score because of the recent activity?

[Tuscani]

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mattwarner wrote:

Do I correctly understand this to mean that paying a collection agency will not hurt my score because of the recent activity?

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I am trying to confirm this. Stay tuned...

[Tuscani]

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mattwarner wrote:

Do I correctly understand this to mean that paying a collection agency will not hurt my score because of the recent activity?

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CONFIRMED. Paying a collection should no longer harm your score. I still wonder what positive impact it has (if any). As always, you still want to get a PFD whenever possible.

Hopefully those of you who have paid recently without a PFD can share the affects it had on your score(s).

[dazednconfused]

Well that's great news. However, the question remains...how negatively did the paid collection affect your score in the first place?  Logically, if the collection [paid or unpaid] hurt your score, then it would seem if you pay it that it should only increase your score.  Right?  Maybe they'll consider getting the glitch out for paid charge offs??  That would be key and we could all be in the 800 club then

[TheNewWorldMan]

I don't expect them to completely erase the effects of a charge-off just because it's paid, but to get some kind of benefit would be logical and fair. Maybe a 50% reduction in the negative effect the CO has?

[dazednconfused]

I honestly don't expect there to be a change at all, although it would be nice.  We should try to keep track though, just in case.  I have an account listed as a charge off now.  It is for a very small amount, so I'll start the test and go ahead and pay it and see if it has any postive effect on the score.  I'll keep everyone posted.