What is the appropriate status for a paid/closed installment account?

[R_W_]

When you pay off an installment loan, is it common practice for them to change your account status to your worst delinquency.  I spoke with the CRA's and they said it is up to the crditor.  They can leave it as the status as of the time that you closed it, or they can make it the worst delinquency over the course of your account history.  For example, if you had a 30 day late 5 years ago, but they have been reportting you as current since then, when you pay/close the account, they can use that field to report the "entire account status" and put your account status back to 30 days past due, because you had once been 30 days past due.  It seems like the field "worst delinquency" is the place for this information and your account status should be where your status was at the time of closure.  Or they can leave it as paid as agreed because that was your status as of the last month reported.

 Which was is the FICO scoring model expecting them to characterize this account?

[RobertEG]

You have two reporting codes/status dates in your file which, taken together,  handle this situation, retaining both pieces of information... highest delinqeucny, and paid.

Current status reflects a snapshot of the accurate status of the account at the time of the last/most current reporting.  It has no historical memory.  Thus, its name "current status."

Current status is a hybrid code, meaning that it can report two different things... delinquency status or current payment status.

When an account is delinquent, the current status reflects its level of current delinquency at the time of reporting.  However, if the account is then paid, either back into good-standing if still open, or paid if it is closed, the current status is updated to now reflect its payment status. 

Thus, a way is needed to still retain the level of account delinquency at the time it was paid and its current status switched over to a payment status.  That is where the separate "Payment Rating" code comes to play.  The prior current status of delinqueuncy level is moved over to the Payment Rating code.

The two codes, taken together, paint the full picture of the level of delinquency at the time of payment, and that the account is now back in good-standing or closed and paid.

Perhaps what you are seeing in your CR is the Payment Rating on the account, which would continue to retain and thus report its highest delinquency level.

The current status should simply read "Paid."

[kobe2012]

I

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@RobertEG wrote:

You have two reporting codes/status dates in your file which, taken together,  handle this situation, retaining both pieces of information... highest delinqeucny, and paid.

Current status reflects a snapshot of the accurate status of the account at the time of the last/most current reporting.  It has no historical memory.  Thus, its name "current status."

Current status is a hybrid code, meaning that it can report two different things... delinquency status or current payment status.

When an account is delinquent, the current status reflects its level of current delinquency at the time of reporting.  However, if the account is then paid, either back into good-standing if still open, or paid if it is closed, the current status is updated to now reflect its payment status. 

Thus, a way is needed to still retain the level of account delinquency at the time it was paid and its current status switched over to a payment status.  That is where the separate "Payment Rating" code comes to play.  The prior current status of delinqueuncy level is moved over to the Payment Rating code.

The two codes, taken together, paint the full picture of the level of delinquency at the time of payment, and that the account is now back in good-standing or closed and paid.

Perhaps what you are seeing in your CR is the Payment Rating on the account, which would continue to retain and thus report its highest delinquency level.

The current status should simply read "Paid."

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i have a charge off that went to collection but got it PFD.. The collection was deleted but the OC status still says "charge off" ..do you know if they will ever change it to "paid"? 

[RobertEG]

The reporting of the CO remains, as it is a prior delinquency code, not an ultimate payment status code.

What will change when the debt that was charged-off is paid is the balance due the creditor, which will be $0, and the current status, which will be "Paid."

A delinquency code is not altered by changes in its current payment status. 

[R_W_]

 Date of last reported update. Condition of account when last updated by creditor or otherwise.

Account Name	Account Number	Date Opened	Balance	Date Reported	Past Due	Status	Credit Limit
		08/23/2008	$0	08/23/2012		PAYS 31-60 DAYS
KIA MOTOR FINANCE 10550 Talbert Ave Fountain Valley, CA-927086031   Account Number: 2008090575XXXX  Status: PAYS 31-60 DAYS  Account Owner: Individual Account.  High Credit: $14,300   Type of Account : Installment Credit Limit:   Term Duration: 60 Months  Terms Frequency: Monthly (due every month)  Date Opened: 08/23/2008   Balance: $0   Date Reported: 08/23/2012  Amount Past Due:   Date of Last Payment: 05/2012  Actual Payment Amount: $4,523   Scheduled Payment Amount: $301   Date of Last Activity: N/A Date Major Delinquency First Reported:   Months Reviewed: 45  Creditor Classification:   Activity Designator: Paid and Closed  Charge Off Amount:   Deferred Payment Start Date:   Balloon Payment Amount:   Balloon Payment Date:   Date Closed: 05/2012  Type of Loan: Auto  Date of First Delinquency: 05/2012  Comments: Fixed rate   81-Month Payment History Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2012 * * * * * * *           2011 * * * * * * * * * * * * 2010 * * * * * * * * * * * * 2009 * * 30 * * * * * * * * * 2008               * * * * *

If you look at the above from Equifax.com, there is a "Status" field which is sayingAYS 31-60 DAYS and there is an activity designator and it lists: Activity Designatoraid and Closed .  The account history table shows there was on 30 day past due in Mar of 2009.  The definition of the status field according to Equifax is: The condition of the account when last updated by creditor or otherwise.  When I closed this account in June and the status changed from Current to PAYS 31-60 DAYS, I got a myFICO alert telling me my score had dropped (>70 points) and when I ran the report it said I had a recent late pay in the last month... I haven't had any kind of late pay in years.... this has to be the cause and if that is the case, I would advise anyone who has an old late on an account to not pay it early because FICO (my other scoring models did not do this) treats it as if you recently were late... I could have just as easily just kept paying the payments for another 2 years and not had this plummet my credit right before my refi....ugh

[RobertEG]

The creditor misreported the current status.  It should read paid.  That supercedes its prior delinquency status.

Again, current status is just a snapshot of its status as of last reporting.

If the account was paid, it is no longer delinquent, mandating an update of its current status.  They failed to do so.

Closed status is not sufficient to inform FICO that it is no longer delinquent, as delinquencies can continue to accrue and be reported on closed accounts.

The creditor is required to update so as to reflect accurate current status.

You can, if time is not of the essence, call them and remind them of their responsibility under FCRA 623(a)(2) to timely update their reporting so as to maintain its accuracy.

Or, you can file a formal direct dispute, citing the inaccuracy and their section 623(a)(2) responsibility to timely update, thus forcing resolution within 30'ish days.

[R_W_]

Thank you!  I have sent a very specific dispute to the creditor and should have the results tomorrow. Hopefully, this will close out this issue for good.  I asked that they change the current status and the DOFD.  Hopefully, this will do the trick and I will get the interest rate I have earned and others will benefit from these posts as well.... wish me luck!

[RobertEG]

Dont worry about any reporting of DOFD on this account.  It is totally irrelevant.

Not having been charged-off or referred for collection, their was no requirement to have ever reported a DOFD, as it has no use.

DOFD has only one credit reporting use... the calculation of the CR exclusion period for a CO or collection.

Not having had either occur on the account, and with it now paid, you wont have either, it is academic.

While their unnecessary reporting of a DOFD is not accurate, it will never be used for anything.  If they dont change the reported DOFD, I would not hassle over it.

[ghannan2000]

I have a similar situation and would appreaciate any thoughts on this.  Several years ago Mar-2006, I paid off an installment loan.  At the time of the last payment, I was 30 days late.  Flash forward to Sep 2012, from the reporting end on EQ and TU , the "Current Payment Status" on myfico, reads "30 Days Past Due", however the balance field  on the account reads "$0" .

So, if I am a human, this situation looks obvious to me (Balance is zero, therefore nothing owed, case closed).  However, when i look at the "Accounts" summary page, the account shows in the balance field "0" but unfortunately "Status" appears as "30 Days Past Due".   I've disputed this with the OC and they fall back on, that was the status when we last reported and suggest there is nothing they can do. 

I realize I've only got 6 months and the account will come off completely, but I hate to think that all this time my fico score was calculating based on me being 30 days past due.  Anyone have a similar experience and any resoluction?

[RobertEG]

You are totally correct.  Continuing to report the current status as 30-late informs others reviewing your CR that the account is currently delinquent.  Thus, it is significant.

It is not necessarily conclusive that reporting a $0 balance signifies satisfaction of the debt.  If a creditor sells a delinquent account, they would also report a current balance of $0/

They apparently have not read the CRA credit reporting manual, titled the "Credit Reporting Resource Guide," in which current status is clearly defined as a snapshot of the account status as of their last reporting, and does not reflect any prior, historical status. 

A satisfied account is no longer delinquent.  Its current status is Paid.

The 30-late would be reported, as your stated, separately as its Payment Rating code, which retains record of the level of delinquency prior to its current status.

I would advise them that they have a statutory requirement (FCRA 623(a)(2)) to update any prior reporting so as to maintain its accuracy.

Their prior current status of delinquent is no longer accurate.