Do COs contribute to AAOA?

[dragontears]

I don't have any COs or anything, this is a hypothetical question. 

I was thinking about scoring factors and this question occurred to me. I do not know the answer so I thought I would see what the current theories were. 

Are charged off accounts included in AAOA calculations? 

If not, at what point were they excluded? Presumably the charge off occurred on an account that was in good standing at some point 

If so, that means, depending on profile, it is possible for someone's scores to decrease if the charged off account is removed? 

[Remedios]

I'm fairly certain they contribute to AAoA untill they are removed. With CO, whatever good payment history existed at first, it doesn't remain. It all goes poof once maximum reporting period is reached.  

Hypothetically, I guess scoring loss is possible but gains from removed CO will typically be more than loss of points from AAoA reduction, unless it's one of the horror CRs where most, if not all accounts ended up being charged off relatively close together. 

I think it might depend on how many COs we're talking about and how much in terms of length of credit they represent. 

[dragontears]

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@Remedios wrote:

I'm fairly certain they contribute to AAoA untill they are removed. With CO, whatever good payment history existed at first, it doesn't remain. It all goes poof once maximum reporting period is reached.  

Hypothetically, I guess scoring loss is possible but gains from removed CO will typically be more than loss of points from AAoA reduction, unless it's one of the horror CRs where most, if not all accounts ended up being charged off relatively close together. 

I think it might depend on how many COs we're talking about and how much in terms of length of credit they represent. 

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The specific hypothetical situation I thought up that prompted the question is:

Someone with many COs on their reports, one of them was a REALLY old account but was CO a few years ago all their other accounts are less than say 5 years They manage to get the account removed by GW. Is it possible that their score could decrease. 

[thornback]

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@dragontears wrote:The specific hypothetical situation I thought up that prompted the question isomeone with many COs on their reports, one of them was a REALLY old account but was CO a few years ago all their other accounts are less than say 5 years They manage to get the account removed by GW. Is it possible that their score could decrease. 

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Yes they factor into age and yes your scores could drop in this scenario. Been there, done that. 20-30 points lost across the board for having my only derogatory, a paid chargeoff, which also happened to be be my oldest revolving account by far, removed early.

I say it was worth it... but sometimes I wish I still had that age because next month, the derogatory would've reached its 7 year mark so the account would've turned positive (because it was paid - if unpaid it would've dropped off - but I didn't know that at the time). 

[RobertEG]

Just as an account with a reported delinquency of, for example, 120-days late continues to be included in scoring, reporting of a CO does not remove the account from scoring.

That includes the age of the account as well as other scoring categories, such as % util if the account remains unpaid and is a revolving line of credit.

Once a period of no more than 7 years plus 180 days has expired since DOFD, however, FCRA 605(c) mandates that any credit report can no longer include any reference to the fact of the CO.

At that point, depending upon whether or not the account remains delinquent (i.e., the debt is unpaid), the entire account might also become excluded,which would result in a removal of all reporting under the account from scoring.

See, for example, the posted policy of Exp on their web page, which states that an entire account will become excluded at the time of exclusion of a reported CO if the debt remains unpaid.  That is based on the separate exclusion provision of FCRA 605(a)(5), which excludes any other adverse information that has also reached 7 years.  Continued current delinquency status on an unpaid account raises that exclusion requirement, resulting in need to then remove the entire account, which if retained must show  correct current status.

[Anonymous]

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@thornback wrote:

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@dragontears wrote:The specific hypothetical situation I thought up that prompted the question isomeone with many COs on their reports, one of them was a REALLY old account but was CO a few years ago all their other accounts are less than say 5 years They manage to get the account removed by GW. Is it possible that their score could decrease. 

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Yes they factor into age and yes your scores could drop in this scenario. Been there, done that. 20-30 points lost across the board for having my only derogatory, a paid chargeoff, which also happened to be be my oldest revolving account by far, removed early.

I say it was worth it... but sometimes I wish I still had that age because next month, the derogatory would've reached its 7 year mark so the account would've turned positive (because it was paid - if unpaid it would've dropped off - but I didn't know that at the time). 

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A paid derog doesnt suddenly become positive, unless negotiated with the creditor. I have had this happen, but through a series of misfortune missteps, and does not happen naturally.

If you have a CO, it remain a CO when paid or unpaid. It will age off 7 years from DoFD. It will never suddenly turn positive and report for 10+ years.

If you have an otherwise positive account or closed and positive, but had a handful of lates, it will never age off paid or unpaid because it does not age off at the 7 year mark - only the lates do. The account would age off at the 10+ year mark (possibly less), depending on creditor, bureau, and reporting - but most cases at 10 years.

What you descrube would have to be a pretty unusual circumstance and is not the norm.

[Anonymous]

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@dragontears wrote:

I don't have any COs or anything, this is a hypothetical question. 

I was thinking about scoring factors and this question occurred to me. I do not know the answer so I thought I would see what the current theories were. 

Are charged off accounts included in AAOA calculations? 

If not, at what point were they excluded? Presumably the charge off occurred on an account that was in good standing at some point 

If so, that means, depending on profile, it is possible for someone's scores to decrease if the charged off account is removed? 

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Yes, COs begin as normal TLs and are factored into AAoA, even after they become CO'd. Only CAs are not factored into AAoA *on Fico*.

Now, Vantage scores are different and include open CAs into AAoA, but not any closed TLs - positive or negative. Meaning, COs are generally closed accounts and would not be factored into AAoA.

[thornback]

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@Anonymous wrote:

A paid derog doesnt suddenly become positive, unless negotiated with the creditor. I have had this happen, but through a series of misfortune missteps, and does not happen naturally.

If you have a CO, it remain a CO when paid or unpaid. It will age off 7 years from DoFD. It will never suddenly turn positive and report for 10+ years.

If you have an otherwise positive account or closed and positive, but had a handful of lates, it will never age off paid or unpaid because it does not age off at the 7 year mark - only the lates do. The account would age off at the 10+ year mark (possibly less), depending on creditor, bureau, and reporting - but most cases at 10 years.

What you descrube would have to be a pretty unusual circumstance and is not the norm.

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Perhaps "turn positive" wasn't the appropriate phrasing.  What I meant was that the tradeline itself would remain but all notations of a CO would be removed as well as the payment history.  The age of the account, however, would still be factored. 

There is recent evidence of this occuring: 

https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Help-with-file-symmetry/m-p/6239485#M182915

And if you search long enough, you'll find other instances. 

That said,  I have not experienced this myself, so... I digress as I do not advocate leaving a paid charge-off on your reports in lieu of removal in hopes the tradeline remains at the 7 year mark.

[Anonymous]

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@thornback wrote:

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@Anonymous wrote:

A paid derog doesnt suddenly become positive, unless negotiated with the creditor. I have had this happen, but through a series of misfortune missteps, and does not happen naturally.

If you have a CO, it remain a CO when paid or unpaid. It will age off 7 years from DoFD. It will never suddenly turn positive and report for 10+ years.

If you have an otherwise positive account or closed and positive, but had a handful of lates, it will never age off paid or unpaid because it does not age off at the 7 year mark - only the lates do. The account would age off at the 10+ year mark (possibly less), depending on creditor, bureau, and reporting - but most cases at 10 years.

What you descrube would have to be a pretty unusual circumstance and is not the norm.

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Perhaps "turn positive" wasn't the appropriate phrasing.  What I meant was that the tradeline itself would remain but all notations of a CO would be removed as well as the payment history.  The age of the account, however, would still be factored. 

There is recent evidence of this occuring: 

https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Help-with-file-symmetry/m-p/6239485#M182915

And if you search long enough, you'll find other instances.

That said,  I have not experienced this myself, so... I digress as I do not advocate leaving a paid charge-off on your reports in lieu of removal in hopes the tradeline remains at the 7 year mark.

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That would be turning an account positive. Paying a CO does not remove the CO annotation or lates from the payment history.

I have 8 such accounts that have turned positive 2 accounts by unfortunate tinkering and 6 from bad luck (this was just recently) for me and 1 for my SO via my impatience.

The 2 accounts that turned positive were dealt with many, many years ago and were COs and eventually paid. These were revolvers and I had foolishly hured a CRA to assist in helping me out for probably 2 years and they jacked up my credit reports and scores from bombing the 3Bs with disputes. This got the 2 COs changed to "paid as agreed" instead of "paid CO" and I had to then wait even longer for the baddies to eventually turn completely positive (waiting for each late to age off). This was a real bummer. Now they are positive TLs and boosting my AAoA. 

I just this past week had 6 rehabbed SLs (previously defaulted) changed from derogatory to "paid as agreed"  unfortunately. So now instead of these TLs aging off in the next 2 years, the "estimated date of removal" and "on record until" have disappeared and I now have to wait out 120 lates to age off 1 by 1 over the next 3-4 years until they eventually turn completely positive. This was an unexpected side effect of rehab. I really wanted them gone because these exact same TLs will be reported again next month as "new" old TLs, just minus the lates.

My SO has a old auto loan CO that was due to be EE'd this month and at the stroke of midnight, I requested it. I did not consider time zones and I am on the East Coast. This caused the request to be submitted on 12/31 and turned into a full on dispute and investigated. The TL was updated not only on TU, but also EX and EQ. Now it shows as "paid as agreed" and the "on record until" vanished for EX. It did not for TU and I was able to EE it. Unfortunately for EX, it will now become a positive account after each late slowly ages off, instead of just dropping off in April. It is anyone's guess as to what will happen with EQ as it still shows a "date of first delinquency", but "paid as agreed".

Any COs I have paid/settled have never removed the lates or CO marks. I watched the entire TL drop once 7 years post DoFD was hit.

[thornback]

@Anonymous  okay.  I was not arguing the point with you. Simply stated what may only be a, perhaps rare, possibility and accepted your personal experience as a far more common occurrence.