Does FICO count charge-offs under $100?

[KJinNC]

I can't get FICO scores yet because on TU and EX, my only account is 1 month old. I am being added as an AU on a card that has been open for several years, so I hope to get my scores soon. Meantime, I have been monitoring VantageScore instead.

Question: I have read that FICO doesn't count collections under $100, while VantageScore does.

On Equifax only, I have a $92 charge-off from 2016 that I recently paid in full, so the balance is now $0. It is my only derogatory item other than hard inquiries.

Will the $92 (or now, $0) charge-off be a factor on my FICO score?

Thanks!

[thornback]

Yes, charge offs hurt for the entire time they remain on your reports. Since yours is paid though, there will be no future negative reporting on the tradeline by the creditor which will allow the derog to age and hurt less over time.

[KJinNC]

Thanks - I have read that FICO ignores collections under $100, so my questions are, 1 - is that true or did I get bad info, 2 - does this also apply to charge-offs or does FICO treat small charge-offs differently than small collections?

It appears that VantageScore counts unpaid charge-offs under $100 but disregards paid charge-offs under $100. I still see it listed, but it doesn't show as a derogatory item. It did show as a derogatory item until I paid it.

[thornback]

duplicate

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[thornback]

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@KJinNC wrote:

Thanks - I have read that FICO ignores collections under $100, so my questions are, 1 - is that true or did I get bad info, 2 - does this also apply to charge-offs or does FICO treat small charge-offs differently than small collections?

It appears that VantageScore counts unpaid charge-offs under $100 but disregards paid charge-offs under $100.

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Yes.  FICO 8 ignores collections, paid or unpaid, under $100.   That is true.   

Older FICO scoring models (like mortgage scores) however, do not ignore them whether they are paid or not, or under $100 or not.   

I'm not 100% certain about FICO 9 -- but I am fairly certain all paid collections are ignored regardless of amount, but unpaid are counted (don't quote me on that though).

This does not apply to charge-offs - paid or unpaid,  regardless of amount.  A charge-off  will always be treated as a major derogatory on all FICO models.   

I don't know about Vantage scores and how they gauge charge-offs. 

[Anonymous]

A perfect response by Thornback.  And yes, all unpaid collections are counted fully by FICO 9, even if the collection in question is for < $99.

The exception would be a medical collection.  FICO 9 does count unpaid medical collections, but softens their impact compared to non-medical collections.

PS.  A nice feature is that the three bureaus no longer show any derogs associated with medical debt until the debt is 180 days past due.  Non-medical lates (in contrast) can start appearing at Day 30.  The newer 180 day rule provides consumers with an additional layer of time to sort out medical bills while being confident that there will be no harm to their reports or score.

[KJinNC]

Thanks - unfortunately, in this case, it was a water bill - when I moved in early 2016, the bill went into the void, I thought it was paid / didn't check, it became a charge-off in late 2016, was surprised to find it there about a month ago when I started working on credit rebuilding. I paid it off online before thinking to ask for a PFD or anything like that. I then asked for a goodwill deletion and they said no. Oh well! It's my only derog, could be worse.