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Help this newbie understand the FICO score

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swanbird
Member

Help this newbie understand the FICO score

[Warning - it's a long post!] I was unemployed for two years from mid-2002 through mid-2004. During most of that time, I paid all of my debts on time, but during the last few months of my unemployment, when I had eaten through my savings, I started missing payments on everything. I didn't call my creditors to work out the problems (big mistake, I know). I continued to miss payments for ther first few months after getting a new job. Then I was able to get current on mortgage, second mortgage, two student loans, HFC personal loan, Wells Fargo personal loan (paid off), and a Bank of America credit card (which I mistakenly closed once I became unemployed; should have just left it open). I have been current on these for the  last 21 months (according to MyFICO).
 
The problem is that I never got current on 10 credit cards and 3 store/gas cards (so many cards, what was i thinking?!). It was always my intention to get them paid off or go to credit counseling to help me pay them off, but obviously I never got around to it.  I am now in a position to start paying them off. Most of them are listed on my credit report as charge-offs. A few are listed as in collections. However, the date of last activity on these credit cards is very fast (within a few months) approaching the 3-year statute of limitations in MD. I know that the passage of the statute of limitations only means that the creditors can no longer sue me, but that the charge-offs and negative payment history will stay on my credit report for 7 years. Should I start making payments on these cards or just let them be? I am afraid that paying them off will lower my score by making the date of last activity more recent and re-start the 7-year clock on how long they stay on my credit report. Should I just focus on paying down my personal loans and the B of A credit card (which is closed, but in good standing)? I have been paying extra on these items, but maybe I should take the money I was going to use to pay the charge-offs and apply it to these items?
 
Also, can someone help me understand a few things from MyFICO summary?
 
- MyFICO says that "[a]ccording to your Credit File you have a total balance of $0 on accounts that are currently delinquent." So that does not include the charge-offs?
 
- MyFICO says that I "currently have a combined revolving balance $20,077." So they are including the charge-offs or collection accounts in this number?
 
- MyFICO says "[t]he proportion of balances to credit limits (high credit) on your revolving accounts is 107%." So that includes blanaces from charge-offs/collections?
 
Sorry for the long post. Things have improved a great deal for me financially and I want to start working on building up my FICO score (currently 563). I have totally changed the way I use money and usually pay cash or charge items to a corporate Amex card (this card is secured by my company and does not appear on my credit report; I have paid it off in full every month for 2 years). Thanks in advance for your help!
Message 1 of 3
2 REPLIES 2
Anonymous
Not applicable

Okay swan, even when something is in collections it is st...

Okay swan, even when something is in collections it is still considered by the FICO because by all rights you still have an obligation to pay these debts off. Secondly, the statute of limitations only applies to how long they can sue for recovery.  The closer you get to that limit depending on the individual balances, the more likely you are to be sued.  Once the three years to obtain a judgement passes, does not mean that they cannot continue to sell the debt to various collectors for the next 4.5 years.  That being said, without some effort, things will likely get worse before they get better. I have noticed that the more stages of collections, the nastier the collection methods.
 
They may not have sued if you called during your unemployment and explained you were out of work however, a good skiptracer may be able to find your current employment status and you may be greeted with a notice of wage garnishment now that you're back the black.
 
Over the next 4.5 years these accounts can and will play havoc with your scores and your life if your creditors are motivated enough.  If you were 6.5 years from date of last delinquency, I would probably tell you to ride it out at this point, I wouldn't really reccommend it.
Message 2 of 3
swanbird
Member

Thanks for your advice, Brammy. I know I should have cont...

Thanks for your advice, Brammy. I know I should have contacted creditors when the problems occurred, but instead I stuck my head in the sand! I'll never do that again. I guess I will go ahead and begi paying off these charge-offs and collection accounts and take the negative hit to my credit score.
Message 3 of 3
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