Understanding FICO® Scoring

[nature_lover]

Back in about Jan. 2007 I settled two medical collection accounts, one for less than full value. On the last triple report I checked, at the end of June, for one account, Equifax says "Settlement accepted," for the other, simply "Paid." Experian says "Legally paid in full for less than full balance" and "Paid, was a collection acct." TU says "Payment after charge off /collection" for both of them. There is no indication whatsoever what the original amounts were or how much was paid--all 3 say $0 for Balance, and N/A for High Balance. These are now about 5 months old. It appears that the status is not updated in the 2-yr History, because one ends as "CO" in 3/07 (2-3 months after I'd paid it), the other as "OK" as of 1/07, apparently the last report date. Since Jan. 07 I have been making a conscientious effort to pay everything on time, to reduce my credit card and revolving loan balances, and not to take on any new debt. What effect are these paid collections having on my score? I have not checked since the end of June, when they ranged 561 to 568 according to CreditKeeper, which I think is an HSBC credit card product and probably FAKO. My scores are low because of high utilization and a rash of late payments in mid-2006 and again in Dec. 2006. I am on a 1 to 2-year plan to improve my score enough to qualify for a decent mortgage.

[Brammy]

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nature_lover wrote:
Back in about Jan. 2007 I settled two medical collection accounts, one for less than full value. On the last triple report I checked, at the end of June, for one account, Equifax says "Settlement accepted," for the other, simply "Paid." Experian says "Legally paid in full for less than full balance" and "Paid, was a collection acct." TU says "Payment after charge off /collection" for both of them. There is no indication whatsoever what the original amounts were or how much was paid--all 3 say $0 for Balance, and N/A for High Balance. These are now about 5 months old. It appears that the status is not updated in the 2-yr History, because one ends as "CO" in 3/07 (2-3 months after I'd paid it), the other as "OK" as of 1/07, apparently the last report date. Since Jan. 07 I have been making a conscientious effort to pay everything on time, to reduce my credit card and revolving loan balances, and not to take on any new debt. What effect are these paid collections having on my score? I have not checked since the end of June, when they ranged 561 to 568 according to CreditKeeper, which I think is an HSBC credit card product and probably FAKO. My scores are low because of high utilization and a rash of late payments in mid-2006 and again in Dec. 2006. I am on a 1 to 2-year plan to improve my score enough to qualify for a decent mortgage.

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Even when you pay a collection the FICO score still takes them into account.  The good news istht now that they are paid off, the totals no longer reflect in your balance owed.  Just be sure they are reporting a 0 balance.  Further now that they have been settled, the acounts should affect your scores less and less after time passes as long as no new derogs are reported.  They will no longer be updated and it no longer looks at if you have outstanding unpaid debt.

Welcome to the world of financial repair.  It can be frustrating at times, but it can be done and the road can seem long but it is well worth the wait.

[nature_lover]

thanks for the encouragement! It just bugs me that it says I paid less than the full amount, or "settled"--but I guess from what you're saying that the effect of that will be pretty minimal in 18 months or so, when I apply for a mortgage.

[Brammy]

You would be surprised at what you can accomplish in 18 months with a little hard work and persistance.  I can say that my score almost ncreased 200 points in that same time frame thanks to great resources like this one.

[fused]

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nature_lover wrote:
Back in about Jan. 2007 I settled two medical collection accounts, one for less than full value. On the last triple report I checked, at the end of June, for one account, Equifax says "Settlement accepted," for the other, simply "Paid." Experian says "Legally paid in full for less than full balance" and "Paid, was a collection acct." TU says "Payment after charge off /collection" for both of them. There is no indication whatsoever what the original amounts were or how much was paid--all 3 say $0 for Balance, and N/A for High Balance. These are now about 5 months old. It appears that the status is not updated in the 2-yr History, because one ends as "CO" in 3/07 (2-3 months after I'd paid it), the other as "OK" as of 1/07, apparently the last report date. Since Jan. 07 I have been making a conscientious effort to pay everything on time, to reduce my credit card and revolving loan balances, and not to take on any new debt. What effect are these paid collections having on my score? I have not checked since the end of June, when they ranged 561 to 568 according to CreditKeeper, which I think is an HSBC credit card product and probably FAKO. My scores are low because of high utilization and a rash of late payments in mid-2006 and again in Dec. 2006. I am on a 1 to 2-year plan to improve my score enough to qualify for a decent mortgage.

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Paying any collection, in full or not, does nothing to help raise your FICO scores. I know, it stinks!