topic Re: Understanding long-term impact of negatives in Understanding FICO® Scoring

Understanding long-term impact of negatives

EaglesFan2006 — Thu, 16 Feb 2023 17:17:11 GMT

Long story short, I am overwhelmed with debt. Personal loan and CC payments are eating my budget alive. Its my fault to be in thie spot and I know that, but there have also been what feels like an endless string of unexpected expenses to the point where this has become very consuming and stressful around the clock.

Anyway that is a set up for my questions ... I cut just about everything I can from my budget and am still able to make payments. Nothing is late yet. However, I don't have much room left at all for any more emergencies and as we all know life happens. So I'm bracing for the possibiltiy that I might miss a payment or go delinquent. I hope I don't, but I'm mentally trying to prepare myself. I've already used up things like skip-pays that were offered and tried reaching out to creditors, I don't think there is anything else I can do to negotiate with them short of debt settlement companies which I do not want to do.

So ... my question is what is the long-term impact of negatives like late payments or anything? I am not concerned with anythig like immediate score dips since I won't be going for any credit for quite a while. But in a couple of years when all this debt is gone we might want to move or look at changing houses...years down the road like 2025 or 2026. So while I know a late payment or worse will drop my score, what might a UW think years from now looking at my file, assuming I don't have anything truly drastic like a charge-off or a collection?

Re: Understanding long-term impact of negatives

SouthJamaica — Thu, 16 Feb 2023 19:06:23 GMT

@EaglesFan2006 wrote:
Long story short, I am overwhelmed with debt. Personal loan and CC payments are eating my budget alive. Its my fault to be in thie spot and I know that, but there have also been what feels like an endless string of unexpected expenses to the point where this has become very consuming and stressful around the clock.

Anyway that is a set up for my questions ... I cut just about everything I can from my budget and am still able to make payments. Nothing is late yet. However, I don't have much room left at all for any more emergencies and as we all know life happens. So I'm bracing for the possibiltiy that I might miss a payment or go delinquent. I hope I don't, but I'm mentally trying to prepare myself. I've already used up things like skip-pays that were offered and tried reaching out to creditors, I don't think there is anything else I can do to negotiate with them short of debt settlement companies which I do not want to do.

So ... my question is what is the long-term impact of negatives like late payments or anything? I am not concerned with anythig like immediate score dips since I won't be going for any credit for quite a while. But in a couple of years when all this debt is gone we might want to move or look at changing houses...years down the road like 2025 or 2026. So while I know a late payment or worse will drop my score, what might a UW think years from now looking at my file, assuming I don't have anything truly drastic like a charge-off or a collection?

As you already know, they impact your scores over a long time, but diminish in impact as time goes by. And the worse the lates, the longer the impact.

As to what an underwriter might think, I can only guess, but I imagine that they would think the same thing you and I would think, which is that you went through a tough patch once, but came out on the other end.

And of course you could tell them that the only reason it happened was that the Eagles lost the Super Bowl.

Re: Understanding long-term impact of negatives

EaglesFan2006 — Fri, 17 Feb 2023 00:27:57 GMT

Two other things I was looking at were:

1) closing a couple of CCs and trying to negotiate a lower rate to pay off

2) working with a place like InCharge or some reputable non-profit DMP, but a settlement company or anything

what sort of negative impact do those have?

Re: Understanding long-term impact of negatives

Thomas_Thumb — Sat, 25 Feb 2023 18:55:39 GMT

@SouthJamaica wrote:
@EaglesFan2006 wrote:
Anyway that is a set up for my questions ... I cut just about everything I can from my budget and am still able to make payments. Nothing is late yet. However, I don't have much room left at all for any more emergencies and as we all know life happens. So I'm bracing for the possibiltiy that I might miss a payment or go delinquent. I hope I don't, but I'm mentally trying to prepare myself. I've already used up things like skip-pays that were offered and tried reaching out to creditors, I don't think there is anything else I can do to negotiate with them short of debt settlement companies which I do not want to do.

So ... my question is what is the long-term impact of negatives like late payments or anything? I am not concerned with anythig like immediate score dips since I won't be going for any credit for quite a while. But in a couple of years when all this debt is gone we might want to move or look at changing houses...years down the road like 2025 or 2026. So while I know a late payment or worse will drop my score, what might a UW think years from now looking at my file, assuming I don't have anything truly drastic like a charge-off or a collection?
As you already know, they impact your scores over a long time, but diminish in impact as time goes by. And the worse the lates, the longer the impact.

As to what an underwriter might think, I can only guess, but I imagine that they would think the same thing you and I would think, which is that you went through a tough patch once, but came out on the other end.

And of course you could tell them that the only reason it happened was that the Eagles lost the Super Bowl.

Sports gambling is a risky hobby, SJ

@EaglesFan2006

Below is a repost of impact of lates on score from ABCD. It has some flaws but is good as an illustration. Avoid a 90 day late at all costs. A 30 day late and even a 60 day late have a substantially reduced impact on score after 24 months - but will still have a negative effect for a full 7 years.

Re: Understanding long-term impact of negatives

SweetCreditObsession — Sun, 26 Feb 2023 06:38:53 GMT

@Thomas_Thumb wrote:
@SouthJamaica wrote:
@EaglesFan2006 wrote:
Anyway that is a set up for my questions ... I cut just about everything I can from my budget and am still able to make payments. Nothing is late yet. However, I don't have much room left at all for any more emergencies and as we all know life happens. So I'm bracing for the possibiltiy that I might miss a payment or go delinquent. I hope I don't, but I'm mentally trying to prepare myself. I've already used up things like skip-pays that were offered and tried reaching out to creditors, I don't think there is anything else I can do to negotiate with them short of debt settlement companies which I do not want to do.

So ... my question is what is the long-term impact of negatives like late payments or anything? I am not concerned with anythig like immediate score dips since I won't be going for any credit for quite a while. But in a couple of years when all this debt is gone we might want to move or look at changing houses...years down the road like 2025 or 2026. So while I know a late payment or worse will drop my score, what might a UW think years from now looking at my file, assuming I don't have anything truly drastic like a charge-off or a collection?
As you already know, they impact your scores over a long time, but diminish in impact as time goes by. And the worse the lates, the longer the impact.

As to what an underwriter might think, I can only guess, but I imagine that they would think the same thing you and I would think, which is that you went through a tough patch once, but came out on the other end.

And of course you could tell them that the only reason it happened was that the Eagles lost the Super Bowl.
Sports gambling is a risky hobby, SJ

@EaglesFan2006
Below is a repost of impact of lates on score from ABCD. It has some flaws but is good as an illustration. Avoid a 90 day late at all costs. A 30 day late and even a 60 day late have a substantially reduced impact on score after 24 months - but will still have a negative effect for a full 7 years.

Thanks for this reminder. It was my reference during my rebuild.

Re: Understanding long-term impact of negatives

atarvuzdar — Sun, 26 Feb 2023 17:57:30 GMT

OP, so sorry for what you are currently dealing with. Some thoughts from my perspective. Debt relief companies help negotiate lower payoff amounts BUT at least some creditors will report these as charge offs which will absolutely crush your credit. I think you were asking about these so I wanted to share the warning.

Just over five years ago my DH (then my DP) and I had a horrible amount of CC debt due to bad spending habits that far outweighed our salaries at the time. Most of our payments were going to interest and we were adding more to the balances each month. We were heading toward potential ruin. We took out a cash out refinance mortgage that literally changed our lives. I by no means want to offer unsolicited financial advice but I wanted to share because we were struggling then, too. Not sure if this solution is right for you. We still get a little irresponsible with finances (our situation, this is not what I think about yours) but we're able to pivot and course correct quickly now. Below I attempted to post the link to our story back in 2017, I hope it works. Wishing you well.

https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Data-Points-Mortgage-Refi-amp-CC-Payoffs-Updated-with-AZEO-Info/m-p/5120484#M132745

Re: Understanding long-term impact of negatives

DONZI — Mon, 27 Feb 2023 04:39:37 GMT

Is there any way to cover things a bit via the job?

Filling in for others (sick, vacation, etc), overtime, raise, etc.

Re: Understanding long-term impact of negatives

EaglesFan2006 — Tue, 28 Feb 2023 03:55:59 GMT

@atarvuzdar wrote:
OP, so sorry for what you are currently dealing with. Some thoughts from my perspective. Debt relief companies help negotiate lower payoff amounts BUT at least some creditors will report these as charge offs which will absolutely crush your credit. I think you were asking about these so I wanted to share the warning.

Just over five years ago my DH (then my DP) and I had a horrible amount of CC debt due to bad spending habits that far outweighed our salaries at the time. Most of our payments were going to interest and we were adding more to the balances each month. We were heading toward potential ruin. We took out a cash out refinance mortgage that literally changed our lives. I by no means want to offer unsolicited financial advice but I wanted to share because we were struggling then, too. Not sure if this solution is right for you. We still get a little irresponsible with finances (our situation, this is not what I think about yours) but we're able to pivot and course correct quickly now. Below I attempted to post the link to our story back in 2017, I hope it works. Wishing you well.

https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Data-Points-Mortgage-Refi-amp-CC-Payoffs-Updated-with-AZEO-Info/m-p/5120484#M132745

Thanks for sharing, I'll read your post. I thought about cash out Refi but I don't know if it will work with how high DTI is. My spouse has no debt in her name (good) but a low score, one that might make it tough to include on a refi. It's something I'll read about more though. Thanks for sharing and the encouragement.

Re: Understanding long-term impact of negatives

atarvuzdar — Tue, 28 Feb 2023 04:31:29 GMT

Wishing you both much luck.

Re: Understanding long-term impact of negatives

SouthJamaica — Wed, 01 Mar 2023 19:43:54 GMT

@Thomas_Thumb wrote:
@SouthJamaica wrote:
@EaglesFan2006 wrote:
Anyway that is a set up for my questions ... I cut just about everything I can from my budget and am still able to make payments. Nothing is late yet. However, I don't have much room left at all for any more emergencies and as we all know life happens. So I'm bracing for the possibiltiy that I might miss a payment or go delinquent. I hope I don't, but I'm mentally trying to prepare myself. I've already used up things like skip-pays that were offered and tried reaching out to creditors, I don't think there is anything else I can do to negotiate with them short of debt settlement companies which I do not want to do.

So ... my question is what is the long-term impact of negatives like late payments or anything? I am not concerned with anythig like immediate score dips since I won't be going for any credit for quite a while. But in a couple of years when all this debt is gone we might want to move or look at changing houses...years down the road like 2025 or 2026. So while I know a late payment or worse will drop my score, what might a UW think years from now looking at my file, assuming I don't have anything truly drastic like a charge-off or a collection?
As you already know, they impact your scores over a long time, but diminish in impact as time goes by. And the worse the lates, the longer the impact.

As to what an underwriter might think, I can only guess, but I imagine that they would think the same thing you and I would think, which is that you went through a tough patch once, but came out on the other end.

And of course you could tell them that the only reason it happened was that the Eagles lost the Super Bowl.
Sports gambling is a risky hobby, SJ

@EaglesFan2006
Below is a repost of impact of lates on score from ABCD. It has some flaws but is good as an illustration. Avoid a 90 day late at all costs. A 30 day late and even a 60 day late have a substantially reduced impact on score after 24 months - but will still have a negative effect for a full 7 years.

@Thomas_Thumb pardon my ignorance but what are the numbers in the left hand column?

BTW I wasn't suggesting @EaglesFan2006 bet on the Super Bowl, just that he fell into a deep, albeit temporary, depression when the Eagles lost

Re: Understanding long-term impact of negatives

Thomas_Thumb — Thu, 02 Mar 2023 00:15:58 GMT

The y-axis on the chart represents points lost. ABCD summarized data he gathered from surveys on lates from a variety of people.

I take the data points as being a consolidated representation of responses. The magnitude of drop is scorecard dependent and obviously can't be taken as a literal prediction. The appropriate takeaway from the graph is an illustration of how late penalties decrease ove time based on severity. Impact of lesser 30 and 60 day lates tapers off substantially after 2 years while 90+ day lates do not.

Again, not my data or graph. I don't take it literally and I don't think 30 and 60 day lates converge in impact at 12 to 24 months. Nonetheless, it is useful as an illustration.

Re: Understanding long-term impact of negatives

SouthJamaica — Thu, 02 Mar 2023 04:55:33 GMT

@Thomas_Thumb wrote:
The y-axis on the chart represents points lost. ABCD summarized data he gathered from surveys on lates from a variety of people.

I take the data points as being a consolidated representation of responses. The magnitude of drop is scorecard dependent and obviously can't be taken as a literal prediction. The appropriate takeaway from the graph is an illustration of how late penalties decrease ove time based on severity. Impact of lesser 30 and 60 day lates tapers off substantially after 2 years while 90+ day lates do not.

Again, not my data or graph. I don't take it literally and I don't think 30 and 60 day lates converge in impact at 12 to 24 months. Nonetheless, it is useful as an illustration.

Thank you. You are indeed a treasure.

Re: Understanding long-term impact of negatives

NotTellinYou — Fri, 24 Mar 2023 16:18:12 GMT

OP, you wrote that you are "overwhelmed with debt". I would be more concerned with that than your credit score if I were you. For now, I recommend forgetting your credit score and engaging a non-profit credit counseling organization that can work with your creditors to reduce or, in many cases, eliminate your interest payments to get you debt free in three years. From there, you can rebuild your credit and, in the meantime, learn to live within your means and get out of this burden. Otherwise, while you claim that the debt "will be gone in a few years" I can't see that happening when it sounds like you are making minimum payments so your high-interest debt will continue to grow and eventually lead to financial disaster. IMHO! Good luck!