topic Re: Do Not Ever Believe...... in Understanding FICO® Scoring

Do Not Ever Believe......

DoctorLoomis — Sun, 22 Oct 2017 05:07:44 GMT

Do not ever believe the saying that really old negative accounts don't hurt your FICO much. Yesterday a 7 year old account fell off my Transunion report and I received a FIFTY FOUR point gain. 54 points. The account was about a $1000 and was 120 days late. I paid it in full years ago but that little ding was worth a tremendous amount of points. Now all three bureaus are immaculate and will remain that way.

Re: Do Not Ever Believe......

RootDet — Sun, 22 Oct 2017 05:11:26 GMT

Congrats!

Re: Do Not Ever Believe......

Ardecko — Sun, 22 Oct 2017 13:14:19 GMT

Was that a collection it just an account that had a 120 late on it?

Re: Do Not Ever Believe......

Anonymous — Sun, 22 Oct 2017 17:56:57 GMT

wow

Re: Do Not Ever Believe......

Anonymous — Mon, 23 Oct 2017 00:20:33 GMT

Major derogs / delinquencies do impact score for the full 7 years. Those that say they don't impact score for a long time may be referring to minors such as 30/60 day late payments. Gaining 50-75 points is pretty standard with the removal of your final/only baddie. Earlier this month I had my last major (120 day late) come off of TU and my score gain was 68 points.

Re: Do Not Ever Believe......

marty56 — Tue, 24 Oct 2017 09:32:06 GMT

It is possible to have a 760 FICO score with a 120 day late. I did but I also have a long credit history.

Re: Do Not Ever Believe......

Anonymous — Tue, 24 Oct 2017 12:43:25 GMT

@marty56 wrote:
It is possible to have a 760 FICO score with a 120 day late. I did but I also have a long credit history.

Correct. My TU FICO 08 was at 768 with a 4.5 year old 120 day late present. At 3.5 years my score was 764. If that trend were to follow, it's possible that my score could have ticked up another 4-8 points by the time the 120 would reach the point of falling off, so I'd estimate around a 772-776 score being the max possible with the presence of a major so long as all other FICO factors are maximized, including a long credit history as you stated.

Re: Do Not Ever Believe......

Anonymous — Tue, 24 Oct 2017 13:49:44 GMT

Congrats OP!!!

I can't imagine what the impact will be when my ch7 falls off, I'm currently at 714 in TU and wife at 734.

Re: Do Not Ever Believe......

Anonymous — Fri, 27 Oct 2017 09:27:43 GMT

Due to the fact my Equifax just had a five year old collection removed (much to my surprise) my score jumped 61 points.

>_> I concur with the OP, never believe the hype about "3 year old" stuff not affecting you anymore. Note my EX and TU are 50-60 points behind my EQ as of now, only difference? That collection is still on those.

Re: Do Not Ever Believe......

Anonymous — Fri, 27 Oct 2017 12:50:29 GMT

@Anonymous wrote:

>_> I concur with the OP, never believe the hype about "3 year old" stuff not affecting you anymore. Note my EX and TU are 50-60 points behind my EQ as of now, only difference? That collection is still on those.

I've personally never heard anyone state this. Almost everyone on this site posts that major derogs/delinquencies will adversely impact your score for the full 7 years. I have never heard of anyone saying that "3 year old stuff" doesn't affect you any more; I've only heard it suggested that people have said that in this thread. The only other commonly agreed upon point aside from majors impacting score for the full 7 years is that minors can lose their sting after 2 years. Collections and the baddies being discussed in this thread are indeed majors, so there would be no reason to believe they'd lose their adverse impact so long as they are present.

Re: Do Not Ever Believe......

Anonymous — Fri, 27 Oct 2017 20:10:58 GMT

On this site, no, but on other credit sites they flat out state quite often than as baddies age they affect the scores less.

Its BS honestly. I was referring to things people may have heard elsewhere.

Example, on Credit Karma it flat out says this, which is really misleading

=====

We noticed negative marks on your report

Derogatory marks generally stay on your report for 7-10 years, but their effects can start to fade over time.

=====

Just google "collections affect score less over time" and see the first 5-10 results, theres a lot of bad info out there.

Re: Do Not Ever Believe......

Anonymous — Fri, 27 Oct 2017 20:58:00 GMT

Actually my guess is that BBS would agree with the sentence you are criticizing from Karma:

"Derogatory marks generally stay on your report for 7-10 years, but their effects can start to fade over time."

Derogs do generally stay on your report for your report for 7-10 years. And they can start to fade over time.

Note that Karma doesn't say will. As BBS points out, a Day 30 late does start to fade over time (typically at month 24 and then after that there is a gradual fading of it, assuming the person is otherwise being a good scout). So it is certainly true that derogs can start to fade. Just not true that they will. It depends on the type of derog.

Re: Do Not Ever Believe......

Anonymous — Fri, 27 Oct 2017 23:25:31 GMT

@Anonymous wrote:
Actually my guess is that BBS would agree with the sentence you are criticizing from Karma:

"Derogatory marks generally stay on your report for 7-10 years, but their effects can start to fade over time."

Derogs do generally stay on your report for your report for 7-10 years. And they can start to fade over time.

Note that Karma doesn't say will. As BBS points out, a Day 30 late does start to fade over time (typically at month 24 and then after that there is a gradual fading of it, assuming the person is otherwise being a good scout). So it is certainly true that derogs can start to fade. Just not true that they will. It depends on the type of derog.

Thats the thing though, its anecdotal. Its why I said to just google up some of the advice out there. I mean for pedantic sake, ive also read that derogatory, the term itself, only applies to accounts in chargeoff/collection status or bankruptcy, not late payments.

Until I showed up on this site and started reading the stuff HERE I was pretty well lost. Its only in the last 2-3 months i have really started to get it. Hell part of the reason I opened so many accounts in the first place is because Nerdwallet has this thing in their breakdown of score thats color coded with the number of open accounts. (less than 5 is poor, 6-10 is fair, 11-20 is good, 21+ is excellent) - Dont crucify me on the exact numbers there, i cant be bothered to go check but it sounds about right.

If it wasnt for the fact my AAoA was already terrible when I opened what I have, I would have destroyed my credit with that six month spree of OPEN EVERYTHINGGGG. As it turns out it will help me firm up in the long run only because after my oldest closed account drops off in 5 months (closed date feb 2008) my oldest account will now be the 5 year old derog on EX and TU and my cap one secured (8 months old) on EQ.

So in a roundabout way NW helped me, but not for the reason intended. I just happened to be in the situation where dodgy advice happened to work out. Or rather will work out in the long run, since my ongoing AAoA will be virtually impossible to ding to a serious degree with 10+ active accounts all aged from the same 90 day starting period or so that also happen to all be my oldest accounts in 5 months.

Makes me wonder if someone with 4-5 rock solid accounts with 10+ year history went to NW and saw that, opened a few new ones because NW said so, and then tanked 50+ points or more on AAoA would justify why I have become such a negative nancy about what some of the free Vantage sites say.

Yeah theres some good stuff, but there are a lot of potential land mines.

Re: Do Not Ever Believe......

elim — Fri, 27 Oct 2017 23:51:17 GMT

I have a 7 year old Fed Tax Lien on TU...

Re: Do Not Ever Believe......

Anonymous — Fri, 27 Oct 2017 23:59:17 GMT

Thats what im saying man, I am NOT saying anyone here is wrong, i am saying what I have seen and learned to not take advice from.

Re: Do Not Ever Believe......

Anonymous — Sat, 28 Oct 2017 00:01:46 GMT

Pretty much everybody on the myFICO forums uses the word derogatories to include late payments (as long as they are at least 30 days late and are reported to one of the big three bureaus). In this we are in line with how it is used by credit bureaus, FICO, and Vantage. The word is often shortened to derogs or the more colloquial "baddies."

I'm not sure what you meant by: "Thats the thing though, its anecdotal." I am not sure what you are saying is anecdotal.

I agree 100% that there is a lot of misinformation about credit out on the internet. (On the other hand there's a lot of misinformation about a lot of things on the internet.) I like the example you gave of the BS out there about number of open accounts. That's an issue BBS and I have been complaining about for a long time: it's tied directly to the extent to which these sites make money as a portal for CC applications. That kind of gross misinformation in pursuit of revenue is appalling.

In my response earlier, however, I was just tackling the particular example you gave. That Karma quote is pretty accurate as far as it goes. Likewise BBS tried a couple times earlier in the thread to point out that some derogs really do get softened over time.

I am not myself certain that the softening of derog scoring impact (for FICO 8) doesn't happen on more than just Day 30 and Day 60 lates. To prove that there is no softening impact on collections -- to take one example -- would be a challenge. You'd have to somehow compare two profiles that are exactly identical in every respect except that one has a three month old collection and the other has a 6.5 year old collection (and then discover that they had exactly the same score). That's hard to do! Testing the effect of CC balances on utilization, to take a contrasting example, is much easier to do, because people can alter their CC balances easily.

Still, I am very open to the possibility that the only derogs for which any softening ever occurs is Day 30 lates (or Day 30 and Day 60). What seems to be known with a fair degree of certainty is that it does happen for them.

Re: Do Not Ever Believe......

Anonymous — Sat, 28 Oct 2017 08:19:42 GMT

It's extremely difficult to tell or quantify the amount that a major derog/delinquency can soften over time. Since we're talking YEARS here, there are way too many moving parts going on with one's credit profile over that time. For example, my 4.5 year old 120 day late. It was my last baddie on TU which yielded a big score gain once removed of course. My TU score did tick up 4 points though right about the 4 year mark of that baddie. Was it the baddie "softening" from hitting 4 years? Impossible to tell. It could have just as easily been my AAoA increasing, inquiries aging, etc. Regardless, if we say it was from the major hitting 4 years for the sake of discussion, that was a gain of 4 points. 4 points is extremely irrelevant with respect to said baddie if the removal of it yielded a 68 point gain. Even if you got 4 points per year for the first 6 years, that's 24 points, maybe 1/3 or so of the amount received when the major is removed. These numbers are of course just for the sake of discussion, as there's no way to quantify them.

Re: Do Not Ever Believe......

Anonymous — Sat, 28 Oct 2017 13:07:46 GMT

Yup, totally agree with BBS. Their are too many moving parts to know if there is (or isn't) any softening on derogs outside Day30/Day60 lates. Age is the biggest one, but over any six year period (collection = 3 months old to 6.5 years old, say) there are all kinds of other changes that can happen: new cards, loans closing or opening, etc.

I know he's followed this whole question of derogs very closely, so I tend to defer to him on this. Seems like the softening effect on severe lates, if it exists, is fairly small -- perhaps that is a fair way to say it. On the other hand a very common derog is the Day 30 late, and BBS and many others seem certain that here the help can be much more substantial. That is in keeping with what FICO itself says about its scoring system (under "bouncing back from past payment problems"):

"Late payment behavior in the past can be overcome; re-establishing credit and making payments on time will raise a FICO® Score over time."

http://www.myfico.com/CreditEducation/New-Credit.aspx

Re: Do Not Ever Believe......

Anonymous — Sun, 29 Oct 2017 02:51:18 GMT

It's also important to undertstand that rapidly diminishing returns exist with the removal of a single baddie if there are still other baddies present. Another thing to keep in mind is that the "worst" [severity] baddie is always going to be the constraint to significant score improvement. For example, one may have a single 90 day late payment that's 3 years old. This person may also have 10 different 30 day late payments scattered across several accounts, all within the last year. The removal of 1, 2, even all 10 of the 30 day late payments may have zero, or very little positive impact on score, as the 90 day late payment is the constraint to significant score improvement. I will say though that upon a manual review, a potential lender would much rather see a lone 90 day late payment from 3 years ago rather than that same late payment with a bunch of lesser delinquencies that happened more recently. While on these two otherwise equal profiles their scores may be very similar, less negative information is always going to be a good thing when a set of human eyes lands on your reports.

Re: Do Not Ever Believe......

EW800 — Sun, 29 Oct 2017 17:32:40 GMT

Congratulations!

I have a foreclosure and a CC settlement showing from about six years ago, that are scheduled to fall off late summer of next year (hopefully sooner with some EE luck). Although I am pleased that my FICO 8 scores are in the 736-747 range now, I am looking forward to seeing what my scores do when these to major baddies fall off. I am hoping for 50 points or so.

As an FYI, my FICO 9 scores are already in the 780-790 range, so this scoring model seems to be a bit more forgiving of my two major baddies than FICO 8 appears to be.

I will also throw out another reference/data point... Somehow my wife got really lucky and the foreclosure never hit her credit reports. Other than that, our reports are very similar. Her FICO 8 scores are in the 820-830 range. I believe this is additional proof of how the foreclosure is holding my scores down, even six years after the fact.