No problems or questions: Only an observation about the impact of a SINGLE bad item on thin report.

[spikeman768]

TLDR:

            A SINGLE derogatory item can have a HUGE impatct on a thin report.

            A single bad item on a small, clean report caused my score to drop 123 points 24 months ago.

            Removing it two weeks ago caused my score to increase 99 points today.

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I have often kept a running spreadsheet of my scores every month for a few years, and I realize that there are many different calculations between bureaus and also different FICO score types.  However, in this post, I'm discussing what has happened ONLY with my Bank of America Truansunion FICO 8.

To put things into perspective, I don't have an accurate record for 2016, but I recall my TU 8 being about 650-670 for quite awhile (with a pretty clean TU report) until I got my first credit card in August, 2016 which was a BofA unsecured card with a $500 limit which I immediately started using at a 10% utilization and never over.  My score quickly moved up to the 700+ range. 

The following information is much more accurate than my estimates above.

From 8/19/16 thru 12/29/16, my monthly TU 8 scores were 720, 765, 781, 765.  There were ZERO derogatory items, I had four closed but good installment loans listed, and I had the ONE credit card on my report...a very clean report.  However, an old Best Buy/AT&T/Enhanced Recovery Services item for $101 came back in January of 2017, and my BofA TU8 score dropped from 765 to 642 on 1/19/17.  123 point drop in one month.  My score has remained between 642 and 655 for 24 months.  I have kept my CC under 10% utilization, and the single derogatory item has stayed on there for the 24 months....nothing else has change at all.

I had the derogatory item removed two weeks ago (mid-cycle),.  Today, my bofa TU 8 score jumped back up to 752....99 points increase in one month.  Apparently, this is how much a SINGLE derogatory item can affect a score (up or down) when a report has very little on it (I think you guys call it a "thin" report).

My experiences have shown me:

- If you have a LOT of derogs on your report (say, 6 or 7), one more removed or added won't do much....other than the initial newness of it perhaps.

- However, if you have only 0-2 derogs, and you get a new one, even one with a $50 balance, it can be devastating to a score.

- Likewise, if you have a single derog item (as I just experienced) that is removed, the improvement can be dramatic.

- Also, I have experienced the following at least four times when I had horrible habits 10+ years ago:  An approximately $15,000+ credit card balance sent to collections, and then settled for $4,000 (a $11K loss to the CC company), has seemingly minimal impact on a score once the incident ages...yet, a very small amount that is a few months old is awful on a score.

The key:  Any derogatory item can be fixed in time (some quite easily), yet you must stop doing NEW stupid things or you will never end your cycle of credit problems and inconveniences.

-Spike

[Anonymous]

One small point to be aware of are the bolded sections of your post above where you're suggesting the 123 and 99 point changes happened in 1 month.  They actually happened during a single moment in time, which was the addition of the negative item to your CR and then the removal of it.  If you were to pull your report/scores with the item present at X time of day, then a few hours later the item was removed from your CR, if you were to pull your report/scores again after the score change would be realized immediately. 

It sounds like this was a collection account, is that correct?  If so, my biggest takeaway here is that a 24 month old lone major negative item on thin file still possesses about 80% of it's initial impact at about the 2 year mark.  That's pretty significant.

It's also worth noting here that above you stated that over those 24 months where your utilization remained constant, no other baddies etc. "...nothing else changed at all."  That's an impossibility, as age of accounts factors are always changing from month to month.  I and others would actually argue that age of accounts factors increasing by 24 months is actually a very significant change.

[spikeman768]

Hey, BBS, thx for the input and clarification.  I was only able to notice the score change during the next month when my free, new score was posted on my BofA portal, but I agree, the score changed happened at the moment the item was added/removed...good point.

Yes, a collection account.   It started as an AT&T service plan sold to Enhanced Recovery Services...on TU report.   As a side note, the purchase was on 4/30/12, I don't know when the account was sold to ERS, the item had been removed previously, and then it came back February, 2017, and I couldn't get it removed (as an ERS entry) until two weeks ago...when the initial purchase had already been almost 7 years before.

"as age of accounts factors are always changing from month to month.  I and others would actually argue that age of accounts factors increasing by 24 months is actually a very significant change."
- Valid point; I had not thought of that.  I don't know how much of an impact the AOA has (at least with my credit details), and I know there are factors that are unknown and also uncalculatable, but during the time in which the AOA was clearly changing month by month, my score stayed relatively unchanged in a vary narrow margin of 642 to 655 for those 24 months which is quite consistent.  I guess I don't have any input as to why that could be. 

-Spike

[Anonymous]

It would depend on what your before/after age of accounts factors were.  When it comes to age of accounts factors, there are diminishing returns as they grow.

For example, someone with a very young file with an AoYA of 3 months, AAoA of 6 months and AoOA of 1 year that opens no new accounts would be at 2 years 3 months AoYA, 2.5 years AAoA and 3 years AoOA after 24 months.  That change is dramatic, where easily 20-25 points are picked up for AoYA alone, then probably another 20-25 points easy for AAoA and AoOA. 

Contrast that young file with one that's more of a mid-age variety with (say) an AoYA of 1.5 years, AAoA of 4 years and an AoOA of 7 years.  Tack on 2 years to each of those factors and the score gain could be (say) 1/3 of the 40-50 point score gain proposed in the first example.

[spikeman768]

It sounds logical that adding something bad or removing something bad to a nearly empty report can have a much more significant effect than doing so to a much larger report.  Same with Average Age...two years added to one year is more significant than adding to 8 years.

Thx for shedding light on those factors.

[FlaDude]

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@spikeman768 wrote:

- Also, I have experienced the following at least four times when I had horrible habits 10+ years ago:  An approximately $15,000+ credit card balance sent to collections, and then settled for $4,000 (a $11K loss to the CC company), has seemingly minimal impact on a score once the incident ages...yet, a very small amount that is a few months old is awful on a score.

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As an aside, note that even though the CBs might only have a 7 year memory on write-offs, some lenders will remember far longer so you might still have trouble getting new cards from those lenders.

[Anonymous]

Good point above regarding internal records that greatly outlast 7 year negative credit report data that goes away.