@Anonymous wrote:Hi all. Been lurking around here (mostly the mortgage section) since starting the homebuying process. Had something interesting happen with my credit scores I wanted to ask about. First little background on my credit profile:
1 credit card, $9000 limit, paid in full each month, no late payments, max utilization ~15%, had since 2011
No other credit, loans, car payment, mortgage, etc.
No liens, collections, derogatories, etc
Last time I checked my credit report was 2013 and it confirmed all the info listed above, but I didn't get my scores at that time. Well I recently applied for a mortgage and my scores all came back around 700-710. I was a little bummed because I thought I would be a good amount higher than that. I chalked it up to just not having much credit history with the single card for 4 years. But when I received a copy of the scores/report from the bank I found a single collection for $54 on there from the university I attended. It had just been placed into collections in 2014. To the best of my knowledge all my accounts were in good standing when I graduated, and I never received any mail, calls, or emails trying to collect.
The bank suggested I contact the collector and write a letter of explanation and request a deletion, so I did that. I was willing to take in good faith it was a legit debt I owed, I wasn't trying to dispute. I just didn't want a bad mark that would hold back my scores and cause me to have rate on my mortgage when I never knew about it or had an opportunity to take care of it. The collection company was suprisingly understanding and agreed if I paid the balance they would put in a deletion request to the credit agencies.
A week later the bank ran my credit again, and my scores jumped up to 800-810! I couldn't believe it. On one side I was thrilled, I was able to qualify for a significantly lower rate on my mortgage. On the other hand I was still a little mad that a single collection for $54 could ding my score that much.
Did that one collection have such a big impact because I only have the one credit card and nothing else reporting? For example if I had 3 cards that were all managed well do you think the collection would have impacted less? I just find it crazy that it could have that much of an effect, and wondered why.
In any case it had a good ending, loan is going through and set to close on my first house before the end of the month. And let me tell you I will not be ignoring my credit from now on!
If you would've had 3 cards the impact would probably be the same. I've heard many contributors here say if you have a pristine record, like in your case, 1 derogatory can really plummet your score. When your score is significantly higher the threshold for mistakes is very small, as you experienced. People with lower scores may already have blemishes on their records, so the impact of additional baddies is cushioned when new ones are added.
