question about fico scoring on charge off accounts

[busymomof3]

Hi,

I am in the process of trying to clear up my fico score.  I have been reading the forums and have not found the answer to this question.  

I have 3 charge off's from 2003-2004 and have never paid them.  My question is this,  how does fico score charge offs.  Does it give a higher score to paid charge off's or does it give the same score to open CO.  I am willing to pay them off if it looks like it will increase my score signifiantly.  If it will only give me a few points I may just leave them and let them fall off on their own.  

The reason I am asking this is I have been renting a house for about a year, but the house has just been posted a forclousure notice.  I want to purchase my own home and want to improve my scores over the next few months while the house is in the forclousre proceedings.  Checking into this now will give my scores time to improve.

Also, what is better and faster in raising my score, an auto loan or a credit card.  I just had to replace my auto and took advantage of the clunkers program and large dealer incentives and bought a car.  I don't not have any credit cards, but will get a secured card if it will raise my score faster than the auto payment.  Or will the 2 work well together.  

Thanks for any advice you can give.

[creditwherecreditisdue]

Paid CO's will remain on your CBR's until 7 years after the DOFD just as unpaid CO's will. Both are going to effect your scores. The difference is how your CBR will be received on a manual review (MR). You can explain away a paid CO, but open, unresolved baddies tend to be showstoppers.

What are your FICO scores now? You may need to both pay off these CO's and do other things to get your scores up in order to get the financing you seek.

Were it not for the financing issue I might suggest you let them fall off. Depending on your state the SOL on these accounts may have already expired. By all means do not make any partial payments - pay them in full in one payment or not at all! Best of all worlds would be if you could arrange a PFD. That would be perfect as long as you have the available funds and can get them to agree (in writing before you remit).

Message Edited by creditwherecreditisdue on 08-23-2009 03:11 AM

[RobertEG]

Sure, if you leave a CO alone, it will fall from you CR at 7 1/2 years from the DOFD on the OC account.

But no one on this site will ever advise you not to pay it if it is a legit debt.  All we can tell you is the FICO implications.

The OC can sue you for the unpaid debt at any time.  FICO falloff does not make the debt go away.

If you choose to just ignore it on the basis of FICO falloff dates, you had better know the SOL implications.  And expiration of SOL does not bar them from suing, at any time.  It only gives you a defense if they do sue.

Be careful in associating CR falloff dates with legal liability to pay the debt.  Not the same.

[busymomof3]

Thank you for your information.  SOL here is 6 years so I think I am safe there.  I am not saying I am never going to pay them or am not responsible for them.  I was just concerned that they would restart the time on my CRB and be there for another 7 years.  It is a very minor amount so paying PIF will not be a problem.  I just didn't want it to reduce my score if I pay it.  This account is actually showing on my CRB as a collection account now.  Do you know if I can dispute on or the other since they are both showing on my CRB.

My scores are TU 565, EQ 628.  I just spoke with a FHA lender and he pulled my EX score which is 581.  He gave me some advice about things to clear up, I just have one question.   My TU score with him is 597  why would there be such a difference in a few days.  I pulled mine here on the 21 of Aut and he pulled it today and the difference on TU was 32 pts.  Not that I am complaining since his was higher, but what could be the difference from this sites score.  EQ was the same for him, just TU was diff.

[creditwherecreditisdue]

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@busymomof3 wrote:

SOL here is 6 years so I think I am safe there.

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Make sure you understand SOL tolling before you get totally confortable.

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@busymomof3 wrote:

This account is actually showing on my CRB as a collection account now. Do you know if I can dispute on or the other since they are both showing on my CRB.

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The account with the OC and all collection account remain on your CBR until they age off in 7 or 7.5 years.

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@busymomof3 wrote:

My scores are TU 565, EQ 628.  I just spoke with a FHA lender and he pulled my EX score which is 581.  He gave me some advice about things to clear up, I just have one question.   My TU score with him is 597  why would there be such a difference in a few days.  I pulled mine here on the 21 of Aut and he pulled it today and the difference on TU was 32 pts.  Not that I am complaining since his was higher, but what could be the difference from this sites score.  EQ was the same for him, just TU was diff.

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Could be different models - TU98 v. TU04. Could be the difference between a mortgage enhanced model and a consumer model. Could be both.

[RobertEG]

That is the answer.  There is no such thing as a single "TU FICO score."

When you pull your FICO score based on your TU credit file (or any CRA), it is based on a generic algorithm for consumer sale.  When a mortgage lendor pulls your FICO, it is probably a mortgage lendor based score, which uses an entirely different algorithm, based on what mortgage lendors have told Fair Isaac that they want emphasized.  Apples and oranges.

Mortgage lendors will probably require you to pay outstanding debt before they will choose to stand in line behind a prior creditor.  FICO scores COs until 7 1/2 years from DOFD on the OC account, but just because it may drop from your CR does not mean that it drops the debt.  When you app for a mortgage, they will probably ask you to dislcose all debt, and falling from FICO scoring does not excuse the debt.

Also be advised that the 7 1/2 year falloff date for COs under FCRA 605(c) is specifically exempt in the event that you apply for any credit transaction involving a principal amount of $150,000 of more.  FCRA 605(b)(1).  So the COs may still be included in a CR requested by a mortgage lendor without restriction of the 7 1/2 falloff date set forth in FCRA 605(c) if the requested mortgage is for $150K or more.

[creditwherecreditisdue]

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@RobertEG wrote:

That is the answer.  There is no such thing as a single "TU FICO score."

When you pull your FICO score based on your TU credit file (or any CRA), it is based on a generic algorithm for consumer sale.  When a mortgage lendor pulls your FICO, it is probably a mortgage lendor based score, which uses an entirely different algorithm, based on what mortgage lendors have told Fair Isaac that they want emphasized.  Apples and oranges.

Mortgage lendors will probably require you to pay outstanding debt before they will choose to stand in line behind a prior creditor.  FICO scores COs until 7 1/2 years from DOFD on the OC account, but just because it may drop from your CR does not mean that it drops the debt.  When you app for a mortgage, they will probably ask you to dislcose all debt, and falling from FICO scoring does not excuse the debt.

Also be advised that the 7 1/2 year falloff date for COs under FCRA 605(c) is specifically exempt in the event that you apply for any credit transaction involving a principal amount of $150,000 of more.  FCRA 605(b)(1).  So the COs may still be included in a CR requested by a mortgage lendor without restriction of the 7 1/2 falloff date set forth in FCRA 605(c) if the requested mortgage is for $150K or more.

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You and I know this RobertEG, but I don't think a lot of people realize that just because info is "gone" from their consumer CBR's does not mean it has vanished from the planet. The reporting time limits do not apply to:

(b) Exempted cases. The provisions of paragraphs (1) through (5) of subsection (a) of

this section are not applicable in the case of any consumer credit report to be used in connection with

(1) a credit transaction involving, or which may reasonably be expected to involve, a principal amount of $150,000 or more;

(2) the underwriting of life insurance involving, or which may reasonably be expected to involve, a face amount of $150,000 or more; or

(3) the employment of any individual at an annual salary which equals, or which may reasonably be expected to equal $75,000, or more.

Message Edited by creditwherecreditisdue on 08-25-2009 09:50 AM

[Jazzzy]

How far can these reports go back? How many years?

Do the CRAs actually keep all this old information?

What in anyone's experience have they seen pop up on these older-than-7 1/2 year-old reports?

[creditwherecreditisdue]

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@LynetteM wrote:

How far can these reports go back? How many years? There is no limitation, therefore forever.

Do the CRAs actually keep all this old information? Have they ever "lost" anything on you? All information is equally subject to loss.

What in anyone's experience have they seen pop up on these older-than-7 1/2 year-old reports? Anything that was once on you consumer CBR and aged off could/should show up.

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The good new is that positive could appear, too!

Message Edited by creditwherecreditisdue on 08-25-2009 04:38 PM