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Posts: 32,865
Registered: ‎08-04-2007
Re: 120 late or paid collection - which is better?

SheltieOwner wrote:



I have your answer for you! I just applied for a pre-approval on a mortgage. You said you are trying to get your score up a few points. If you will be applying for a mortgage, DO NOT change it to a collection. According to my lender, FICO calculations for mortgages work differently than any other loan. Your FICO scores will go down if you report a collection instead of just a 120 day late. On the TU, for the mortgage FICO, it recalculated my husband's once decent 724 to a 698. This became his lowest score. So, something to seriously consider is what you are trying to get the extra points for. If it is for a mortgage, know that the expected outcome is that a collection is received worse than a simple missed payment. For other loans, it may be different. I won't know until the dispute is fully processed how it affects the overall FICO. Hope this helps!

Per FICO scoring, a 120 days pat due is just as bad as a CA. What causes the score drop is when a non-updating CA becomes updated with a new update or reported date. If you haven't had a baddie updating in a long time, and it switches to a collection comment, then you can very well see a significant drop depending on when it reported last. YMMV on the FICO version too. 


As a side note, your FICO version for TU could come into play into your drop. The FICO version on here is older than what most lenders use. Some can see differences of 10-20-30+ points when compared the same day. Now if your lender is pulling TU98 (some do...not many), then you'd have an accurate comparison.