Interesting data point

[SRT4kid93]

@BrutalBodyShots 

you may find this interesting 

i was helping my friend with their credit profile recently. And I discovered he had almost 30 missed payments at one point. (27 to be exact)

However since the account was never charged off, the payments are falling off one at a time. (Instead of the entire account falling off at date of first delinquency)

from what I can tell, they started falling off about 9 months ago. Leaving him with 18 missed payments as of now. 

the interesting part is, he has not gained a single point on any of the bureaus despite 9 missed payments coming off. 

now, we know 30/60 day lates lose most of their sting after 2 years. And we also  know that the first late payment hurts the most, and any subsequent late doesn't have the same sting, since you already have missed payments. 

even with all this being said, I was somewhat surprised to see that he didn't gain a single point after 9 missed payments came off. 

even if these payments lost 2/3 of their sting after 2 years. (And let's assume they lose another 10-15% of their sting over the course of the next 5 years)

There is still some sting left by the time they fall off after 7 years. Sure, 1 late payment may not make any difference. But almost 10 late payments falling off? I would have thought you would see something positive impact. 

I honestly didn't know what to tell him, except for the fact that every time a late payment falls off, his profile looks that much better because there's 1 less late payment. 

[JoeRockhead]

What was the severity of those 27 late payments... 30, 60, 90, 120+ days?  More importantly, when was the most recent late payment?

[SRT4kid93]

@JoeRockhead 

I don't remember the exact mix, but I know that there were some 30 day late and some 60 but no 90 days. 

all the late payments were over two years old for sure. I remember that much. I think the most recent was like 3 years ago

[Thomas_Thumb]

For impact of late aging on Fico 8 score refer to the below graph from ABCD in 2020. It is based on data submitted to him from posters in his FIRE network.

Generally speaking score penalty is about severity and recency, not quantity. For example, if you have multiple 30 day lates, the most recent one "sets" the penalty. In a like manner, the primary score boost comes when the last 30 day late falls off - often minimal or no score increase for prior 30 day lates falling off. If a profile includes a combination of lates, the most severe one controls the penalty although recency is also in play. Thus, a 4 year 60 day late can take a back seat to a 6 month 30 day late. 

[SRT4kid93]

@Thomas_Thumb 

So according to what you said, the most recent late sets the tone, meaning the additional (older) lates really don't make much a difference. 

so are you saying he will see no score increase until the last one falls off? He could theoretically go from 27 lates to 2 lates without seeing any difference? Even if it's not 2 lates, it sounds like he could at least make it down to 5-10 lates without seeing any improvement at the very least

that just sounds so weird to me, because someone with multiple lates is more of a risk than someone with 1. Even if the lates are older, you take 2 people. One with 1 5 year old late payment and another with 30 5 year old late payments and their score could be extremely similar.

 you would think the score would react accordingly. 

[Thomas_Thumb]

Key components for risk are severity and recency. They control the narrative. That's not to say frequency has zero influence, it's minor. Lates aren't addative for a score penalty.

You can have 10, 30 day lates and get 5 or perhaps even 8 removed through good will letters and/or the oldest ones aging off but see little to no score improvement - if the remaining ones are the most recent ones. 

Look at it like this:

If you have a 30 day late, you show certain level of risk. Another 30 day in the same timeframe reaffirms the risk but does not change its level.  Severity of lates determines risk level along with recency.

[BrutalBodyShots]

@SRT4kid93 it comes down to diminishing returns. The same is true of other negative items beyond late payments like collections or charge-offs. As @Thomas_Thumb correctly points out, it's about severity and recency. A greater number of negative items can impact "number of accounts paid as agreed." If you have 30 late payments across (say) 15 accounts and all late payments are removed from (say) 4 accounts, that's 4 more accounts now "paid as agreed." That may help for a few points, but not even close to the change that would be realized from a severity or recency threshold change.

[Patient957]

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@SRT4kid93 wrote:

@Thomas_Thumb 

So according to what you said, the most recent late sets the tone, meaning the additional (older) lates really don't make much a difference. 

so are you saying he will see no score increase until the last one falls off? . 

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That's pretty much it, yes.

One exception would be if the there's more than 1 account and the most recent late was a 30 day.  In other words, if he goes from the most severe being 60 days to 30 days, then he should get some points.

But if the last late to fall off is 60 days, then he'll have to wait until the last one falls off to get any points.  Hope that makes sense.

[SRT4kid93]

@BrutalBodyShots 

In this particular case they were all on 1 account.  

[BrutalBodyShots]

Gotcha. It wouldn't make a difference at all then.