11-02-2007 03:53 PM
11-02-2007 04:37 PM
11-02-2007 07:57 PM
11-02-2007 10:02 PM
After extensive reading on credit modeling, and feedback I have received from numerous other contacts, here is my approximation of the effect of late payments on credit scores. Take them or leave them, but they are based on extensive data, and exemplify the light hit of 30-day lates, and the hell-hole of 90+-day lates.
30-day late payments:
Around a 15-20 pt or more sure hit when they first occur, dropping to around a 10-15 pt. hit after one year of aging, then to around 5-9 pts after two years of aging, dropping to only a 1-5 pts hit after thee years. They fade relatively fast in the schema of the scoring algorithms, for they are not yet “dirty” file indicators.
60-day late payments:
Around 35-40 pts immediate hit, dropping to 20-25 after one year, around 15-20 after two years, but only decreasing to around 18 after three years. They fade slow, but linger on. Outside of the generic FICO scoring model, 60+ lates also drive most consumers into a new scoring category by most lendors using their own models into a “dirty” credit history bin-bucket.
90+-day late payments: the red flag of the credit industry
High initial hit, compounded upon the prior 60-day late, for a total hit of 50+++ points. Serious hits. Warning signs blare in the scoring algorithms. This only drops by around five points after one year, to around 40-50. Two years out, the hit is still around 38 points. After four years, still lingering around a 30 point hit. A 90-day late lingers strongly, and fades at the same rate as the melting of the polar ice caps. After 6 years, it appears to only recede to around 20, at which point it dissolves and goes away at 7 years. Few can wait 7 years to recover those points.
In comparison, a drop in % revolving credit utilization from 50% to 10% will achieve about a 50-60 point FICO increase. However, one 90-day late wipes all that out, based on the weighting. Pay on time, pay on time, pay on time!!!
Regardless of the accuracy of my point projections, the bottom line is obvious.
11-03-2007 06:53 PM - edited 11-03-2007 06:53 PM
As usual I enjoyed reading your post! I will, however, have to disagree with some of your assumptions. A lot will depend on which bucket one was in prior to the new derog being reported. A single 30 day late can lower one's score by more than 100 points but it is true that this late's negative affect fades rather quickly.
Now with a 60 day late it's different. A bigger drop in scores and big negative affect for a full two years.
A 90 date late is a serious derogatory on a credit report and has the same negative affect on scores as a CO, collection, or any public record. If it's less than two years old, it will have a major negative affect on scores. By six years it's just nothing more than a zit on your CRs, once it's removed you might see a small improvement in scores if any.
These responses are not provided or commissioned by FICO. Responses have not been reviewed, approved or otherwise endorsed by FICO. It is not FICO's responsibility to ensure all posts and/or questions are answered.Advertiser Disclosure: The listings that appear on myFICO are from companies from which myFICO receives compensation, which may impact how and where products appear on myFICO (including, for example, the order in which they appear). myFICO does not review or include all companies or all available products.
IMPORTANT INFORMATION: All FICO® Score products made available on myFICO.com include a FICO® Score 8, along with additional FICO® Score versions. Your lender or insurer may use a different FICO® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more
FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Score and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating. FTC's website on credit.