Can correcting an error drop the score?

[Anonymous]

A friend asked me for help with her Experian credit report. She knows it is important to keep it accurate and thinks she found an error. Before correcting it, she wants to understand what it will do to her FICO scores. Here's the situation:

Years ago, she lost one credit card. It appears that the Experian (FICO-8) kept both the balance and credit limit at the time of loss and added a new entry with the new card. So, they have two entries with the old balance being relatively high compared to our other cards. The payment schedule on all the entries is perfect, even (bizarrely) the old one.

Once I take these entries out, the following things happen:

- Credit utilization drops from about 11% to just under 6%

- Outstanding credit (the amount she owe's) drops by over 50%

- Total credit limits drop by 15%

- Available credit drops by about 10%

I would look at those first two things as good and those last two things as bad in a credit score. And since much of what I think is good (e.g. paying off a loan on time) turns out to have a negative impact on scores, I am reluctant to tell her correct this while out car loan shopping, new home shopping (both of which she is doing now).

What do you think will happen? Does her score go up or down?

Thanks!

[Anonymous]

You don't mention any details on the age of the card and her current average age of accounts. That could also play into the equation. 

[KLEXH25]

Can you explain what you mean by "lost"? Did she physically lose it? Was it delinquent and closed? The wording is throwing me off. Did she ever pay the balance in full?

[Anonymous]

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@Anonymous wrote:

A friend asked me for help with her Experian credit report. She knows it is important to keep it accurate and thinks she found an error. Before correcting it, she wants to understand what it will do to her FICO scores. Here's the situation:

Years ago, she lost one credit card. It appears that the Experian (FICO-8) kept both the balance and credit limit at the time of loss and added a new entry with the new card. So, they have two entries with the old balance being relatively high compared to our other cards. The payment schedule on all the entries is perfect, even (bizarrely) the old one.

Once I take these entries out, the following things happen:

- Credit utilization drops from about 11% to just under 6%

- Outstanding credit (the amount she owe's) drops by over 50%

- Total credit limits drop by 15%

- Available credit drops by about 10%

I would look at those first two things as good and those last two things as bad in a credit score. And since much of what I think is good (e.g. paying off a loan on time) turns out to have a negative impact on scores, I am reluctant to tell her correct this while out car loan shopping, new home shopping (both of which she is doing now).

What do you think will happen? Does her score go up or down?

Thanks!

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@Anonymous Hello. No your instincts seem to be on point on this one, but @Anonymous is right as well. If the account is deleted it will also affect ageing metrics. 

If you dispute it as balance zero, they may correct the balance or may delete the account. If they just correct the balance zero great. If they delete the account and it is older than her average age of accounts then it will slightly reduce that, which should not be a very big deal unless this is one of only a couple accounts and this is one of her oldest. Now, if it's younger than her average age, it can only help her to get rid of it, agewise. 

[Anonymous]

CreditSweeper:

Thanks much for the request for details:

Age of the card and her current average age of accounts:

- Experian has both the old and new cards as openend in 9/2014.

- Her average credit length is 10.3 years

- Her oldest account is 33.3 years

[Anonymous]

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@KLEXH25 wrote:

Can you explain what you mean by "lost"? Did she physically lose it? Was it delinquent and closed? The wording is throwing me off. Did she ever pay the balance in full?

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Thank KLEX. Yes, the card was physically lost. It was not delinquent. Experian shows--on the old card--the balance as of the loss. They also show the last payment as of two years ago (the loss date) and the payment history on both the old and new card as exceptional. That's something I don't understand. How can something with an outstanding balance for two years and no payments have a highly positive rating.

The new card (the one the balance was reassigned to) was paid off, went back up some, and is now almost paid off. As I said, the old/lost one still shows a balance.

[Anonymous]

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@Anonymous wrote:

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@Anonymous Hello. No your instincts seem to be on point on this one, but @Anonymous is right as well. If the account is deleted it will also affect ageing metrics. 

If you dispute it as balance zero, they may correct the balance or may delete the account. If they just correct the balance zero great. If they delete the account and it is older than her average age of accounts then it will slightly reduce that, which should not be a very big deal unless this is one of only a couple accounts and this is one of her oldest. Now, if it's younger than her average age, it can only help her to get rid of it, agewise. 

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Aaaahhhh! Now I understand. So, since this card is 6 years old but her average credit age is 10, then her average credit length would go up by (according to my calculation) about a year. One more positive aspect to the change.

Still, is there a way for me to guess at whether the net effect will be positive or negative?

Thanks again!

[Anonymous]

@Anonymous Yeah that pretty much proves the net effect will be positive if any. Should be crossing the 9% aggregation utilisation threshold, I assume you were speaking of that should be worth some points, and she’ll gain a year of age if it’s deleted. Both things are positive.

I can’t see any negatives unless it was one of only a couple cards and removing that put her under the minimum number imposing a penalty. Should only be a gain from where I’m looking, either way. At worst no change from AAoA.

[Anonymous]

@Anonymous By the way, good on you for being careful and asking the question rather than just jumping off the cliff and hoping.