topic Paying collections and the new scoring model in General Credit Topics

Paying collections and the new scoring model

Anonymous — Thu, 17 Jul 2014 22:16:40 GMT

So here's my dilemma. I'm in the process of getting approved for a small personal loan to pay off some collections in full.

My credit report shows 1 charge-off account, and 2 medical collections from 2010. I plan to pay the charge-off in full, and one of the medical collections in full with this loan.

Question 1 - I read somewhere that in the new Fico scoring model, paid in full collections carry a better impact on your credit score than derogatory and/or settled collections. Is this true?

Question 2 - Also, is it true that by paying one of these medical collections in full it will still hurt my score by making the recent activity on the collection more recent? That sounds like a bug in the credit scoring system if that's true....

The reason I ask the 2nd question is because the personal loan is through my credit union, and their credit pull only showed 1 of the 2 medical collections I have. The medical collection showing on their report is an account that the creditor hasn't updated since 2010. The other medical collection, that shows on other reports but not theirs, was also placed into collections in 2010 however they report the balance every month, so that activity is current.

I just don't want to do anything stupid, I'm trying very hard to get my credit where it needs to be and build for the future.

Any advice would be appreciated!

Re: Paying collections and the new scoring model

Anonymous — Thu, 17 Jul 2014 22:17:08 GMT

Anyone? I can't find any definitive information regarding the new fico scoring system.

Re: Paying collections and the new scoring model

takeshi74 — Fri, 18 Jul 2014 12:40:15 GMT

The Rebuilding subforum is probably a better place to look for such information.

Re: Paying collections and the new scoring model

Revelate — Sat, 19 Jul 2014 02:07:46 GMT

Wasn't the reduced impact of paid collections in FICO 9 rather than FICO 8?

Nobody's using that new version yet to my knowledge, but anecdotally we know that paid collections are better from an underwriter's perspective so it makes sense that FICO finally took that into account.

Edit: wierd I couldn't find ot either, I wonder what I'm recalling at this point.