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Consumer Facing Indicators vs. Actual Underwriting

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Valued Member

Consumer Facing Indicators vs. Actual Underwriting

My last severe deliquency was in 2013. I had D120+ and was pretty close to default on multiple student loans. In retrospect it seems interesting because the student loan default rate skyrocketed in 2012 and has been elevated ever since.

 

Fast forward to today, I am getting closer to the 7 year mark. However, in the CK and Experian dashboards it still says "Severe deliquency reported". But as with everything else it says the effect fades over time. But it still shows up as an indicator on why my score is what it is today.

 

I have been able to open multiple credit cards starting from 2016 as well as a personal loan and that's 3 years after the deliquencies. So clearly despite having many installament accounts late that has not restricted my credit then before. So why is the indicator still there? Occasionally when I'm declined for credit (like 2 years ago because my CC utilization was too high) it reports multiple reasons and the Deliquency was cited as one. But they should weight the reasoning based on the CURRENT priority not based on anything more than 3 years ago. It is not accurate and wastes the consumers time in focusing on the wrong reason.

 

Anyone else have late payments 5+ years ago and still see it as a reason (but probably not weighted heavily) in credit decisions TODAY? I think the same thing applies with DTI - I was approved for a personal loan but applied for the 2nd it gave 2 reasons: DTI too high (if that was the case why approve me for the 1st loan - My DTI was the same then, you can't tell me one 10k loan pushed it over the edge...) and late payment.

 

I think those are surface reasons but the reasons lie deeper and more to do with arbitrary criteria that changes on the back end in banks and less to do with your actual responsibility as a borrower TO-DAY (not yesterday). Thoughts?

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Super Contributor

Re: Consumer Facing Indicators vs. Actual Underwriting

As long as a derogatory is on your credit, it’s damaging your credit. Even a 30 day late that’s almost 7 years old has been shown to give 30+ points back when it falls. 

 

120 days is close to a BK in scoring... to give you an idea, when I lost my 120 day lates and charge offs I got 54 points on TU overnight — WITH my BK still on my report for another 2 years and 7 months. 

 

FICO scores are for lenders to assess the riskiness of a potential borrower and any negative has a big impact. The bigger the negative, the worse the impact. 




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Valued Member

Re: Consumer Facing Indicators vs. Actual Underwriting

I have a collection from almost 7 years ago due to fall off this year and it's still listed as one of the negative factors affecting my score.
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Valued Member

Re: Consumer Facing Indicators vs. Actual Underwriting

Thanks Saeren - I had a feeling D120 would be almost on par with collection or something. So I'll expect to see a big jump in 2020 hopefully Smiley Happy

 

So an interesting question would be - For Non-student loan debt is it better to BK7 and get it over with quick or stretch it out and settle with a Debt rehab company? Hypothetical of course as I'm not in that situation.

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Frequent Contributor

Re: Consumer Facing Indicators vs. Actual Underwriting


@CreditSenshi wrote:

My last severe deliquency was in 2013. I had D120+ and was pretty close to default on multiple student loans. ...

 

Anyone else have late payments 5+ years ago and still see it as a reason (but probably not weighted heavily) in credit decisions TODAY? ...


I have a 120day late over 5 years old, and I'm fairly certain it's still costing me about 50 points.  Because it was reported to only one credit bureau, and that one is consistently about 50 points lower in multiple scoring models -- even though that report also has a much older AoOA and AAoA than the other two as well as good payment history from an auto loan the others don't have (multiple reasons to be higher, and just that one to be worse, and worse wins the tug of war by a long shot).

 

A minor baddie might fade, but the worse ones don't decrease much until they just dissapear altogether



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Super Contributor

Re: Consumer Facing Indicators vs. Actual Underwriting


@CreditSenshi wrote:

Thanks Saeren - I had a feeling D120 would be almost on par with collection or something. So I'll expect to see a big jump in 2020 hopefully Smiley Happy

 

So an interesting question would be - For Non-student loan debt is it better to BK7 and get it over with quick or stretch it out and settle with a Debt rehab company? Hypothetical of course as I'm not in that situation.


Technically you can always recover quicker rehabbing your debt than going BK7 since a BK7 is a 10 year black eye. If I didn’t have my BK right now, my scores would easily be in the mid 700s. 

 

BK provides immediate relief from dealing with the fallout from debt problems but it’s not something I would ever recommend to someone if they have the ability to pay their debts. My situation at the time was awful and if I hadn’t filed for BK, when I went out on disability a year later things would have been crazy bad for me since I didn’t get my back pay until 2014. That 10 year black eye is painful though and I am curious to see if US Bank, one of the two main banks that I burned, is going to let me back in this year when EX and EQ catch up to TU with the loss of baddies. 




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Super Contributor

Re: Consumer Facing Indicators vs. Actual Underwriting


@CreditSenshi wrote:

But they should weight the reasoning based on the CURRENT priority not based on anything more than 3 years ago. It is not accurate and wastes the consumers time in focusing on the wrong reason.


It's the right reason.  Major delinquencies/derogs from any point in the last 7 years (even 6.9) if it's still present on your credit report is going to be costing you 60-80 points in most cases.  Typically when the final one of these falls off, within that score range where one will report their FICO score gain.  Your timeline of 3 years does not coincide with with the 7 years that the developers of the FICO algorithm and analytics have found seems to be the better indicator of one's chances for default.

 

Do you have access to a FICO score source that lists for you negative reason codes?  If not, a free source would be creditscore.com where next to your EX FICO 8 score it will list "factors hurting your score."  The reason list is always in order of adverse impact on your score.  Unless your utilization is extremely high, I'd be willing to bet good money that in the 4 negative reason codes listed for you that the #1 reason would be "serious delinquency" or some form of it. 

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Valued Member

Re: Consumer Facing Indicators vs. Actual Underwriting

Thanks I'll look into that. Serious delinquency very well may be the first reason then. If that's worth 50-60 points then I should see a huge improvement in credit terms about a year from now
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