Collection acct deleted, Fico still dropped?

[Anonymous]

The whole fico scoring never made since to me. And this next delima realy boggles the brain!!!! last week,i had a new collection account added to my credit report with Equifax, the same day the collection was added, my Fico score dropped some 40 pts, the account was not mine, i even contacted the OC which happened to be one of those internet college degree sites! The rep i spoke to acknowledged it was a mistake. I  disputed it with Equifax and a couple of days ago the account was in fact deleted from my credit report, However, when it was deleted, it dropped my score another 7 pts! This makes little since, you would think if a collection is added by mistake and it drops your Fico score some 47pts, then when its deleted as an "error" it would give you that 47 pts back, NOT!!!!!!!  Something else that doesnt make since, i have read many posts and blogs about paying off old collections vs letting them fall off if close to 7 years. Many people have said that paying off old collections now can actually hurt you and lower your Fico score being that its new activity, as well, many people, even fico , ftc.gov and a few others, stated that a couple of years ago, Fico changed the way it calculated old debts in reference to paying them off. "suposedly" paying off old debts/collections now will not hurt you by lowering your fico score but this as well is NOT true! in the past 2 weeks, i have paid off two collection accounts on my credit report. With both collections, the same day the OC reported it as being paid off or paid in full, my fico score lowered!

I think the government realy needs to get involved with this. The whole system is screwed up and there is no clear cut understanding of Fico scoring models. It's , at best, a guessing game ( gamble) and it should not be this way. Consumers need to know EXACTLY what will help them clear up old debts, and what will hurt them! In the past  year and a half, i have been deligently repairing my credit. I have gotten 14 false collections removed, paid several collections off, and a few collections fell off after the 7 year mark. and with all the effort i have been doing in the past year and half, if anything, my credit score is worse today then it was when i first starting repairing my credit. im at the point now where im saying "screw it, its pointless"....The more one tries to repair ther credit, the worse it gets.

[Anonymous]

Agreed.  It is kind of stupid when the system encourages you to not pay past due collections.  I have one I'm working with where I keep telling the CA that I want to pay, but unfortunately I can't unless they delete which they absolutely refuse to do.

Personally I think there should be a change whereas a CA has to be removed say 12 months or so after paying them.   To have a paid CA remain and hurt you for 7 years is asinine.

[bicknar]

Hi BRB, and Welcome to the forums,

Unfortunately the scoring process is quite complex and without more details it is difficult to say what would cause your negative score change.  In a perfect scenario, you would drop 40 when it was added by mistake, and then gain 40 when it was removed.  However what we do not know is what else was different.  Your score may have gone up 40 when it was removed, but then dropped 47 because a credit card was maxed out, or another negative item posted or something. 

Since it looks like you have pulled your reports before and after, I would put them side by side and look for anything that is not exactly the same.  I'm guessing there is more at work here than just that one collection. 

As far as the scoring system and what helps and what hurts... Keep reading.... There is a lot of GREAT information here in these forums and a lot of helpful people. 

Hope this helps,

A

[Anonymous]

Thanks for the replies..there realy is nothing more going on behind scenes with my credit. Again, for almost 2 years now, i have been deligent in repairing my credit, reading blogs, posts, forums, etc etc and doing all the right things. As far as Fico scoring, yes, it is complex, but shouldnt be! not for the average consumer, rather, it should be very simplistic...

Bottom line is: i have been paing all credit cards on time, ive gotten ALOT of eroneous collections removed from reports. ive paid off a couple collections and quite a few have fallen off in the past year. I have been able to get a Macy's store charge card, a first premeir credit card all to which i have paid the balances off each and EVERY month. Yet, today, my Fico score is lower then it was when i frist started repairing my credit, you tell me that makes since!

I have monitoring with all three credit reporting agencies which notify me of changes to my credit and score. As stated earlier in my first post. there was a collection added to my Equifax credit report that lowered my Fico some 40pts, yet when i disputed it, and it was removed, did i get the 40 pts back? NOT! during that same period, nothing else took place on my credit report that would keep it from rising or i would have gotten an "alert", as well, i compared my logged credit reports and noted no changes.

What else is wrong with Fico scoring system?

1.  does this make since: you pay your bills/credit cards, loans each month on time, and "maybe" your fico score will rise a few pts, maybe, lets say 5pts each month for paying on time, however, should you miss a payment, your score will tumble 40 plus pts. THAT in itself is not fair, accurate or equal!

2. If you have any sort of credit monitoring program with equifax or any other agency, when your Fico score drops, it sends you an email alert stating something to the effect like"

 your score has dropped, what "may" have caused it to drop is a number of things......THIS IS OUR CREDIT shouldnt it be more specific in telling us EXACTLY why it was lowered or changed? instead of basically saying, "hey, we wanted you to know your score has changed, but we dont know why, "MAYBE" it was this or that, but we're just not sure!!

3. Credit reporting problems in general : what else doesnt make since to me is this - Shouldnt a company be required to, lets say, if they are able to report your negative to a credit reporting agency, they should also be required to report the good stuff? case in point: Doctors bill- If you pay your balance up front or whenver before collections, shouldnt that go on your credit as something good? why not? if you DONT pay a medical bill, they are quick to report that negative info to the credit reporting agencies. Shouldnt it work both ways? A utility bill:- you sign up for service, they run a credit check on you to determine a deposit for service, later, you skip out and do not pay your final bill, they report the negative to the agencies, shouldnt they also be required to list the positive payments? the whole system is screwed up.

It takes an INSTANT to ruin your credit, but a damn lifetime to fix a miniscule problem!

As far as Fico scoring - Its not just me whom thinks all things are not equal..A couple of finance compaines have told me, and ive read it on blogs, that a growing number of lenders are NOT going by Fico score, they will tell you they have found it to be unreliable indicator of credit worthiness, thus they use other various systems.

The bottom line for me, in what i have learned in the past 2 years is this : whatever is wrong with your credit, the BEST thing to do is not wory about going back and filling in the cracks in reference to fixing old problems. Just go forward, and do not let nothing else as far as bills, payments get behind, wait, after 7 years, old things will start to fall off. If you go backward, and try and do the right thing at making amends in fixing old debts, you WILL MOST CERTAINLY see things go bad and realize all the effort you have placed on getting things fixed, have turned out in vein.

As well, reading for many hours all the blogs about "laws regarding Fair credit reporting act, FDCPA, reading FTC.gov website etc, they make it all sound so easy with respect to "disputing" errors. They tell you your rights, what you can do if a violation occurs, limitations on debt collectors, rules and regluations, how you can sue a debt collector for violations..Im here to tell you, its all easy on the ears but putting all those laws to good use, "fruitless" indeed.

[bicknar]

Hi again BRB,

I hear your frustration.  And congratulations on paying all of your cards on time.   Did you have a chance to check the reports side by side?  If you look at each line and note any differences there are many here that can help determine the cause of the score fluctuations and assist in a direction to take to get that score moving up.

It may not make us happy that one mistake can hurt us much more than a history of paying things... However we have to keep in mind that FICO scores are a tool for lenders to determine your credit risk.  If you miss a payment, that is going to look very bad to a creditor.  Thus the larger negative effect.  Also, as this is a reflection of your creditworthyness, no if you pay in cash it will not get reported as that is not a credit transaction and has no relation to your credit history. 

If you have any sort of credit monitoring system, it does NOT have any impact on your score.  Any time you pull your report it is considered a soft pull. 

You are on the right track though... Paying your bills on time consistently, and understanding how the process works is the best  way.  Knowledge is power.  Yes some statements may make it sound easy, but believe me the whole thing is a complicated mess.

Good Luck,

A

[Anonymous]

Once again, there is nothing any different that would have caused the fluctuation. The bottom line is: all things should be considered "equal" if a collection goes on my report that is a mistake, and it drops fico by 40 pts, and later its determined to be placed in error and removed, Fico should give me that 40pts back! It is "not" equal when i pay a bill and lets say my fico increases 5pts, and i miss a payment and it decreases some 20 pts. nothing about that is equal. and ive done alot of reading and i think the consensus is with me on that.. There is nothing fair about paying bills on time, paying old debts off, paying credit cards on time etc etc and my Fico STILL goes down. no mater what i read, common sense dictates there is no equality there!

[bicknar]

Yes,  if every last detail exept for that one instance of the collection coming on or off is EXACTLY the same, then your score should have moved accordingly.  Other than that there is the theory of Re-bucketing...  which would mean that you are making good progress, however are now compared to a new group of individuals with tighter scoring criteria... Time will tell. 

[RobertEG]

brb, I too hear your frustration.

I am not justifying the over-reliance that creditors place on FICO scores, the incorrect reporting to the CRAS, and neither am I defending Fair Isaac.

FICO scoring is NOT a full, and often not.fair, evaluation if you current credit worthiness, or credit status.  But  that is not what it is.

It never has been, and is not, or should not be marketed as such.

It is primarily an analysis of your risk of untimely payment within the next two years.  It is a risk analysis of payment potential, and not an analysis of your credit worthiness.

FICO does not even look at some of the most important factors governing your credit-worthiness, such as income, total debt, total assets, employment history, etc.

A Donald Trump-level consumer may have almost infinite credit worthiness in securing major credit, but a poor payment history.  I doubt highly if Donald Trump's accountants have pulled his FICO score in the last few years, or even cares what it is.

Contrast that consumer with Avg Joe the Plummer, who makes $35K, with little other debts or assets, and pays timely each and every month. Joe the Plummer may, in fact, have a better score than the corporate wheeler-dealer.

If you look at FICO as a risk payment analysis, the very first thing you would consider is if the consumer has defaulted in the past.  That is why payment history sits up there at 35% of your score.  If you have a derog that the creitor had to pursue to collection in order to obtain payment of, then payment of this should ersase the fact of the earlier payment derog.

Next down on the lost in % util of existing credit.  The higher you climb in your % util, the greater becomes your risk. So % util is scored at 30%.

You are correct in that FICO hits you hard on derogs, and does not reward you at the same level  for their absence. Continuing to hold rimely payment increases your lenthth of credit history, can improve your CLs, and add to your mix of credit. 

If your CR is screwed up, that is not a FICO issue.  That is a consumer/creditor/CRA issue.  FICO only scores what is in your CR.

I agree that there is no clear understanding of the FICO scoring models.  Any consumer, myself included,  would love to see a full publication of their scoring algorittms,  and their  resulting impact on your consumer credit score.  But to ask the govenment to somehow regulate how credit scoring is done flies in the face of over  200 years of U.S. intellectual property law.  FICO has  a proprietary trade secret which they market as credit scores. They have chosen not to use the patent process, but rather to preserve their property as a trade secret.

No provision of the FCRA has ever even been discussed, to my knowledge,  by Congress, that would require dislclusre of how credit scores are calculated.

The only provision currently enacted is your ability to obtain, once a year, the three digit number that comes out of the tail end of their scoring algorithm, but use of annualcreditreport.com.

I would also like to know the secret formula for Coca-Cola, but wont await congressional action to provide it to me.

[Anonymous]

thanks for the reply..I do understand a great deal of what you are saying..My biggest problem is, if i may use your statement:

"f your CR is screwed up, that is not a FICO issue.  That is a consumer/creditor/CRA issue.  FICO only scores what is in your CR.I agree that there is no clear understanding of the FICO scoring models. "

what IS screwed up is when  a collection is added to your credit report in error, Fico wants to drop you by some 40pts, 2days later when i contacted the collection agency they stated it was an error and would have it removed, on day 4 it was removed, yet Fico chooses not to give those pts back. crap like that is what the government needs to look into. i have been waiting now over 2 weeks and have yet to see those pts back. However, in the past week and half, i did pay off two collection, one of which was a charge of utility bill from 6 months ago, and with me paying those off in full, guess what, my Fico dropped yet another 6 pts.

Thus my reasoning by experience, to not pay ANY more collections off, nadda! I will not look back, ill just go forward a new beginning.

[bicknar]

Hi BRB,

Doesn't it seem silly that the scoring method encourages us not to pay off the collections?  The way the scoring works with collections is... A collection is bad.  Doesn't matter if it's got a $12,000 balance or a $0 Balance.  Best bet is to try to pay for delete.  That will ensure that the collection is removed instead of sitting there with it's bad juju on your CR.  Is it a true indicator of your risk to creditors if they take it off if you pay?  Maybe maybe not, but if we can get the stuff off to counteract the other stuff that we don't agree with, I'm happy to consider it a wash.

A