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Ironic that a PFD is easier to obtain than GW adjustment!

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Anonymous
Not applicable

Ironic that a PFD is easier to obtain than GW adjustment!

I find this to be a pretty odd inconsistency in the credit system and thus scoring.  It seems that PFDs are easier to obtain from unpaid debts held by collection agencies or charge-offs than it is to obtain a GW adjustment for a late payment on an account that's already PIF.  I find this ironic since the person that's actually paid the account in full already has displayed superior creditworthiness despite the account showing a late payment than the person that simply stopped paying and still owes on the account.

 

Basically, the person that mishandled their account worse (didn't pay all of it) stands to walk away with a HIGHER credit score than someone that had a couple of late payments that did in fact pay off the account as agreed.  Because the one individual still owes money on the account, he has leverage to offer to pay the remaining balance (or less sometimes) in order to have the account and/or negative information deleted from his credit reports.  The other guy that did in fact already pay off the account that writes in to request a GW adjustment for removal of the reported late payment has no such leverage as the lendor/creditor has already received their money, and as a result the large majority of the time they receive a simple "no" answer.

 

It's kind of BS if you think about it that by doing the right thing you may in fact end up with the lower score, all other things being equal of course.  It makes me wonder... if you rack up a serious delinquency, say 90 or 120 day late payment on an account you're almost better off letting it go to collections, then PFD.  In the short term this could damage ones score a bit more than the 90 or 120 day late reported, but if you can PFD and get it taken care of even if it takes 3-6 months or even a year that's still significantly less time to have your scores damaged than waiting the 7 years for the late payment to fall off.

 

Anyone else think the system here seems a bit backwards?

Message 1 of 27
26 REPLIES 26
JayTee1
Frequent Contributor

Re: Ironic that a PFD is easier to obtain than GW adjustment!

It makes sense if you think about it in terms of bargaining power.  A collection agency or other creditor will make an effort in order to collect money you owe; it's that simple.  And it doesn't always work, either.  

 

A creditor may often forgive a single 30-day late and remove it from a credit report, and they don't do it out of affection -- they most likely offer the goodwill in the hopes the debtor will continue to do business with them and provide them with further income.

 

It may not seem fair, but the credit scoring system doesn't actually work based on fairness to the consumers of credit.  The consumers of the credits scores themselves are lenders -- not us.  Credit scores are designed to make it easy for lenders to assess risk easily.  Whether or not it's fair, or even all that accurate, is debatable.

 

By the way, I would disagree with your final example.  It is certainly not better to let a payment go to 90 or 120 day late status with the hope of deleting a collection at a later time.  The OC can and will still report the late payment and will probably send the account to collection as well.  The late payment will affect your score horribly initially, and then the collection will affect it as well -- both can be reported.  The best thing to do if you're forced to make a late payment at all, ever, is to contact the creditor ahead of time and work something out, hopefully avoiding the issue altogether.

March 2014: Abysmal, low 500s


April 2015: TU 607 | EQ 599 | EX 608
March 2019: TU 717 | EQ 727 | EX 727
Message 2 of 27
Anonymous
Not applicable

Re: Ironic that a PFD is easier to obtain than GW adjustment!

Oh I get the whole bargaining power thing, I just think it's ironic.  There are far more examples of PFD success that I can find than GW adjustments for late payments.  Your 30 day example is a soft one; I was talking more major derogs of 90-120 days.  I understand that scoring is about assessing risk, which is why I think this situation is quite backwards.

 

One person may have been severely late once or had a handful of lates throughout, but they still paid the account off like they were supposed to.  The other person did not pay off the account like they were supposed to, and depending on the PFD terms may "settle" for half or at times minor amounts on the dollar.  These two people may have taken out the exact same $2k loan and the first person pays back $2k and the second only ends up paying back $700 due to a PFD negotiation.  If the PFD includes deleting the account completely, that person will walk away with the higher credit score for the next 7 years than the guy that "did the right thing" and paid back the full $2k which is a greater sign of creditworthiness and certainly would suggest that he's the less risky one.  Again, all other things being equal.

 

Perhaps I was a bit lax with my example of intentionally letting something go to collections.  Obviously research would need to be done beforehand.  If the creditor is known to do PFDs and completely remove the negative account but they aren't at all known to give GW adjustments, it honestly wouldn't be a "bad" strategy to consider what I said unless the person was planning on applying for new credit in the very near future.

Message 3 of 27
RobertEG
Legendary Contributor

Re: Ironic that a PFD is easier to obtain than GW adjustment!

FICO is not an evaluation of "creditworthiness."

It is an evaluation of risk of becoming delinquent.

 

Once delinquent, whether or not the debt is paid is not a factor in determining liklihood of becoming delinquent.

Additionally, the CRAs official oppose both GW deletions after payment and PFD agreements prior to payment.

Neither are acceptable adjustments to credit reports, and their credit reporting agreements with the CRAs explicitly instruct that they not be granted.

 

If neither are granted, then any subjective view of fairness of one over the other disappears.

 

Message 4 of 27
RonM21
Valued Contributor

Re: Ironic that a PFD is easier to obtain than GW adjustment!

I kind of think it does have to do with the bargain power in the sense that with a GW deletion, most of the times they already got what they wanted already....their money. So now, they would be going out of their way for you when they already have what they want.

On the other hand, PFD, they are still trying to recoup the funds. This allows some to listen a bit easier because even though they won't admit it, they know some consumers will just push it to the side anyway, and they won't get any if it back.


Total CL: $321.7kUTL: 2%AAoA: 7.0yrsBaddies: 0Other: Lease, Loan, *No Mortgage, All Inq's from Jun '20 Car Shopping

BoA-55k | NFCU-45k | AMEX-42k | DISC-40.6k | PENFED-38.4k | LOWES-35k | ALLIANT-25k | CITI-15.7k | BARCLAYS-15k | CHASE-10k

Message 5 of 27
elim
Senior Contributor

Re: Ironic that a PFD is easier to obtain than GW adjustment!

It's all about the benjamin's...   Always...  Sux

Message 6 of 27
Anonymous
Not applicable

Re: Ironic that a PFD is easier to obtain than GW adjustment!


@RobertEG wrote:

FICO is not an evaluation of "creditworthiness."

It is an evaluation of risk of becoming delinquent.

 

Once delinquent, whether or not the debt is paid is not a factor in determining liklihood of becoming delinquent.

Additionally, the CRAs official oppose both GW deletions after payment and PFD agreements prior to payment.

Neither are acceptable adjustments to credit reports, and their credit reporting agreements with the CRAs explicitly instruct that they not be granted.

 

If neither are granted, then any subjective view of fairness of one over the other disappears.

 


Right, so you're essentially making my point.  You have one person that has been slightly delinquent in making some late payments on an account, then you have another person that was severely delinquent in that they opted for whatever reason to completely stop paying, allow the account to get severely delinquent and go into collections.  In evaluating the risk of these two individuals in becoming delinquent again in the future (and the severity of it) I think most would agree the guy that had his account go to collections should be deemed as the higher risk and hence possess a lower FICO score to reflect that.

 

With the current system, that doesn't happen - With PFDs being much easier to obtain than GW adjustments (MANY times easier from reading on these forums) the individual that possesses the greater risk also stands the greater chance of having that information wiped from their reports resulting in higher scores.

 

Whether or not the CRAs are supposed to do PFDs and or GW adjustments really is irrelevant to this discussion IMO as both can and do happen every day.  It's just that PFDs seem to be much easier to obtain for the reason already touched on above by several people that there is bargaining room there based on the debt still owed.

 

Just to assign some numbers to it for fun to illustrate my point:

 

Person A:  700 credit score, gets a 120 day late on an account but pays off the account in full the following month.  Score drops to 600 with the derog which will impact him for the next 7 years.  Chances of getting that derog removed?  Slim, as we all know it depends on creditor/lendor.  More than likely, however, this individual will possess scores in the 600's for at least the next several years, possibly the entire 7 years.

 

Person B:  Identical profile to Person A and identical starting score of 700.  Goes delinquent on an account for 150+ days that goes to collections.  Score drops to 575.  2 months later he calls and negotiates a PFD.  Chances of the PFD happening are better than average.  It happens and within months Person B is back to a 700 credit score and possibly in doing so has actually paid back LESS than what was originally owed (that Person A actually DID pay back).

 

Both guys have perfect credit history for the next 2 years and Person A's score grows to 640 and Person B's score grows to 740.  Based on their scores, who is more risky?  Based on the scenarios I gave, who is more risky?  That's where feel the disconnect is.

 

The system is what it is, I just find it ironic if you look at my example above that these two people could be viewed almost flip-flopped in terms of who is more risky a couple of years or even just months from now. 

Message 7 of 27
JayTee1
Frequent Contributor

Re: Ironic that a PFD is easier to obtain than GW adjustment!

I think your assumption that PFDs are that easy to obtain is flawed.

 

Also, the chances of someone with a credit score of 700 letting an account go to 120 days late is slim, unless something is going on (job loss, medical issues, etc.), in which case it's probably not the only account that'll be affected.

 

You do have a point, but I think you're using edge cases to make it.  None of the scenarios you have laid out is likely.  I don't have any hard data to back up my statement, but I don't think you do either.

March 2014: Abysmal, low 500s


April 2015: TU 607 | EQ 599 | EX 608
March 2019: TU 717 | EQ 727 | EX 727
Message 8 of 27
crrredit
Established Contributor

Re: Ironic that a PFD is easier to obtain than GW adjustment!

In addition to doing the right thing, knowing how the game is played also helps. For example, the person with a 30-day late could also do a PFD. In that case, they have done the right thing and have also made the move that serves them best. 

 

This all gives Experian's new tagline--"Be Better at Credit" an interpetation they may or may not have intended.

Message 9 of 27
Anonymous
Not applicable

Re: Ironic that a PFD is easier to obtain than GW adjustment!

 
Message 10 of 27
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