topic Re: FICO scoring of Collections under $100 in Understanding FICO® Scoring

FICO scoring of Collections under $100

mysterythemoon — Mon, 28 Nov 2016 18:01:34 GMT

I've heard baddies under $100 do not hurt your credit score. With that said, is that baddies you've paid off that won't hurt it, or is it ANY collection under $100? And if so, is there any reason to setlle a $55 collection at all?

Re: FICO scoring of Collections under $100

Anonymous — Mon, 28 Nov 2016 20:05:24 GMT

I would suspect, though I have no direct knowledge of this, that whether it factors into your SCORE or not, it still factors into your profile. For example, if a creditor only wants to extend credit to those with no unpaid collections, or for that matter no recent PAID collections, and they pull your credit and see that it's there, that might be a red flag.

Also, there is of course the employment/clearance adjudicator credit pull. A clearance adjudicator or employer might consider it extremely poor judgement for a candidate to have an outstanding collection for which they could easily put together the funds to put behind them.

Scoring is only a small piece of the puzzle.

Re: FICO scoring of Collections under $100

mysterythemoon — Mon, 28 Nov 2016 21:36:10 GMT

Makes sense

Re: FICO scoring of Collections under $100

Anonymous — Fri, 23 Dec 2016 20:51:56 GMT

PAID COLLECIONS:

A paid collection < $100 has no effect on FICO 8.

A paid collection of any magnitude has no effect on FICO 9.

Paid collections still count against you in models earlier than FICO 8.

UNPAID COLLECTIONS:

All unpaid collections of any magnitude count against you for all FICO models. Slight caveat: unpaid medical collections count against you a lot less in FICO 9, though I don't know any of the details.

And then, as severedFinger (amazing screenname, btw) observes, anyone who does a manual review of your report can still see your collections and make whatever decisions they want based on that.

Edit: Revelate gave me a very helpful correction later on in this thread, so I am amending the above to say that FICO 8 does not count a collection of < $100 even if it is unpaid. I do not know if FICO 9, has the same policy. As I mention above, in FICO 9 all paid collections of any magnitude are ignored.

Re: FICO scoring of Collections under $100

surferchris — Wed, 30 Nov 2016 05:39:09 GMT

@Anonymous wrote:
PAID COLLECIONS:

A paid collection < $100 has no effect on FICO 8.

A paid collection of any magnitude has no effect on FICO 9.

Paid collections still count against you in models earlier than FICO 8.

UNPAID COLLECTIONS:
All unpaid collections of any magnitude count against you for all FICO models. Slight caveat: unpaid medical collections count against you a lot less in FICO 9, though I don't know any of the details.

And then, as severedFinger (amazing screenname, btw) observes, anyone who does a manual review of your report can still see your collections and make whatever decisions they want based on that.

Good information.

Re: FICO scoring of Collections under $100

Anonymous — Fri, 23 Dec 2016 02:12:47 GMT

This is interesting. I have a $69 CO that is 6.5 years old. Current scores are 730 eq, 767 tu and 757 ex. Now I assumed I would get a bump when the CO fell off in 2017... especially the Equifax score. Which means there is are different reasons it is so low relative to the others.

Re: FICO scoring of Collections under $100

Revelate — Fri, 23 Dec 2016 05:51:18 GMT

@Anonymous wrote:
This is interesting. I have a $69 CO that is 6.5 years old. Current scores are 730 eq, 767 tu and 757 ex. Now I assumed I would get a bump when the CO fell off in 2017... especially the Equifax score. Which means there is are different reasons it is so low relative to the others.

A charge off is not a collection; two different elements as far as FICO scoring is concerned altogether. Those are good scores with any charge off on record TBH, I have a 6 year old 60 day late which depressed my EX score to 756 when my tax lien was temporarily off. Outside of ugly installment utilization (for my 18 month old mortgage) otherwise was an optimized file at 3 years AAOA (not that I found any difference from 2 years).

Re: FICO scoring of Collections under $100

Revelate — Fri, 23 Dec 2016 05:53:34 GMT

@Anonymous wrote:
PAID COLLECIONS:

A paid collection < $100 has no effect on FICO 8.

A paid collection of any magnitude has no effect on FICO 9.

Paid collections still count against you in models earlier than FICO 8.

UNPAID COLLECTIONS:
All unpaid collections of any magnitude count against you for all FICO models. Slight caveat: unpaid medical collections count against you a lot less in FICO 9, though I don't know any of the details.

And then, as severedFinger (amazing screenname, btw) observes, anyone who does a manual review of your report can still see your collections and make whatever decisions they want based on that.

Small-balance collections accounts

FICO® Score 8 ignores small-dollar "nuisance" collection accounts in which the original balance was less than $100.

That applies to both paid and unpaid is my understanding and has been the literature from FICO since the original FICO 8 marketing slides to lenders.

Re: FICO scoring of Collections under $100

Anonymous — Fri, 23 Dec 2016 06:42:59 GMT

Thanks so much, R.

Re: FICO scoring of Collections under $100

Anonymous — Fri, 23 Dec 2016 16:52:48 GMT

@Revelate wrote:
@Anonymous wrote:
This is interesting. I have a $69 CO that is 6.5 years old. Current scores are 730 eq, 767 tu and 757 ex. Now I assumed I would get a bump when the CO fell off in 2017... especially the Equifax score. Which means there is are different reasons it is so low relative to the others.
A charge off is not a collection; two different elements as far as FICO scoring is concerned altogether. Those are good scores with any charge off on record TBH, I have a 6 year old 60 day late which depressed my EX score to 756 when my tax lien was temporarily off. Outside of ugly installment utilization (for my 18 month old mortgage) otherwise was an optimized file at 3 years AAOA (not that I found any difference from 2 years).

I uh used the wrong code. It's a paid collection, not a charge off.

Re: FICO scoring of Collections under $100

sjt — Fri, 23 Dec 2016 20:07:57 GMT

I heard with FICO 08 unpaid collections under $100 do not effect your score.

Re: FICO scoring of Collections under $100

Anonymous — Fri, 23 Dec 2016 20:55:14 GMT

@sjt wrote:
I heard with FICO 08 unpaid collections under $100 do not effect your score.

You are right. Revelate pointed that out yesterday, for which I thanked him. I have update my original comment with this language:

Edit: Revelate gave me a very helpful correction later on in this thread, so I am amending the above to say that FICO 8 does not count a collection of < $100 even if it is unpaid. I do not know if FICO 9, has the same policy (regarding small unpaid collections). As I mention above, in FICO 9 all paid collections of any magnitude are ignored.

Re: FICO scoring of Collections under $100

sjt — Mon, 26 Dec 2016 17:44:03 GMT

If you paid a collection and it shows up as a paid collection, is there any benefit to your FICO 08 scoring?

Re: FICO scoring of Collections under $100

Revelate — Mon, 26 Dec 2016 17:58:54 GMT

@sjt wrote:
If you paid a collection and it shows up as a paid collection, is there any benefit to your FICO 08 scoring?

No, underwriting of course is a different matter. I wonder how quickly FICO 9 will be adopted, was developed in part as a response to VantageScore but Vantage seems to have disappeared as a primary UW score at any rate.

Re: FICO scoring of Collections under $100

sjt — Tue, 27 Dec 2016 21:01:56 GMT

@Revelate wrote:
@sjt wrote:
If you paid a collection and it shows up as a paid collection, is there any benefit to your FICO 08 scoring?
No, underwriting of course is a different matter. I wonder how quickly FICO 9 will be adopted, was developed in part as a response to VantageScore but Vantage seems to have disappeared as a primary UW score at any rate.

Im glad FICO 09 changed that. Its doesnt make sense that there would be no scoring effect if you paid the collection.

Re: FICO scoring of Collections under $100

Revelate — Wed, 28 Dec 2016 00:44:10 GMT

@sjt wrote:
@Revelate wrote:
@sjt wrote:
If you paid a collection and it shows up as a paid collection, is there any benefit to your FICO 08 scoring?
No, underwriting of course is a different matter. I wonder how quickly FICO 9 will be adopted, was developed in part as a response to VantageScore but Vantage seems to have disappeared as a primary UW score at any rate.
Im glad FICO 09 changed that. Its doesnt make sense that there would be no scoring effect if you paid the collection.

FICO and financial institutions are kinda fire and brimstone types unfortunately and I guess "the data didn't support it" making a difference for those that got righteous on a collection vs. those that didn't... though we know that UW absolutely cared on that point.