On that note (and given some of the above discussion), I'm in a quandary about how exactly to pursue some of the remaining adverse accounts on my reports. If the article by Liz Pulliam Weston is correct, I'm currently being scored within a group that has blemished credit. According to Experian's Plus Score Simulator, my score would dramatically improve if I had no "delinquent balances currently past due". If I had the accounts completely deleted, I would create a shift in my scoring basis. One, I would affect the overall average age of my report by having the older ones deleted. Second, according to Liz Pulliam Weston's article, I would be thrust into a peer group for scoring that consisted of people with no blemishes. If the latter became the case, I would be at the bottom of that scoring group because my overall age would be drastically lower than the rest, vastly lower limits, etc. My score could potentially drop significantly. So, do I just work to have adverse accounts marked Paid, or is it just always good to have them deleted completely and have a clean (albeit immature) report?
Great question, the scenario you outlined does happen. It sounds wrong, but many times you will see a drop in your FICO score when all the negs are removed. This is due to shortening you overall history, and moving more effect to your utilization factor. However, this becomes part of the "long range" planning of credit repair. There is no clear cut answer here, it depends upon your situation, and your priorities, as well as your timing for need of credit. I was shocked when my FICOs dropped significantly AFTER all my negs were gone! But...like many members, for me it was a greater feeling to see them all gone, than the FICO drop. In the longer term, the scores will come back up higher, and stay in a higher overall range. When you are at this point, your own personal choices come into play. What is more valuable to you? Is it a higher FICO (at the moment), or is it a "clean report", or do you need to apply for credit soon? You may be at the point where "strategic repair" is what you're attempting. For example you work on the most recent/newest negative, but then wait for aging of your accounts, then go after the next neg, etc. I feel in the long run it is better to get "clean", then let aging happen. I think with the negatives gone, you have greater control over your FICO at that point. You can manage utilization, control inquiries through limited applications, control your mix of accounts. So, step back and decide what your priorities and needs are, and then develop the plan that best suits your situation.
I'm trying to get investor loans that are generally no-docs or low docs (stated income/assets/etc.) because conventional financing won't work with DTI, etc. The problem with that is that most of those lenders want a 720 or better. There are some that will take 680. I'm now in a juggling act with my score. My last true FICOs on 4/5 were 668-691-706. 691 being the middle gets me in under the wire. My negs will be dropping off within the next couple of years, so I'm faced with that "strategic" decision. Do I work hard to get them removed now and take a big drop that puts me below the target score, thus risking an inability over the short term to get the loans I need. Or, ride out the negs building "age" into my good accounts so I'll have more of a chance of dropping in a range above 680 when they're all finally gone. I never thought I would stop until I had spotless credit, but I may have to at this point. In that line of thought, I've got a couple of accounts that I've been arguing with the CAs over their validity, so I haven't paid them. So, they're showing unpaid on my CRs. It seems I would be better off just paying them and letting them show as paid on my reports from a score perspective. (That seems to go against everything we learn here, but may just be ideal in my situation...)
New question. Is there a 'magic' age for your credit file at which you might be lower than your peers, but still at a level that the difference in credit score is negligible? Anyone with expertise (or an opinion) here? Even after I clean up a couple of accounts on hand, I've got some that are going to stick around. The upside is they'll report as paid and will help give my file age. On the other hand, every file I get deleted (even if bad) is going to lower my average age. For the calculation-meisters out there, here's how my credit file stacks up. I have (bad first): 1 Judgement showing paid - will continue until 10/08 1 Foreclosure - will continue until 8/10 (opened 4/93, F/C 10/03) 6 Derogatory accounts besides the F/C (all closed accounts) . $1656 not paid - will not fall off until 2010 . $513 not paid - falls off 7/10 . $315 not paid - falls off 4/08 . $403 not paid - falls off 5/07 . $59 not paid - falls off 5/08 . $43 PAID - not sure when it falls off 4 Positive Accounts that are closed (NEVER LATE) . Amex opened 3/94, never late, closed amicably will continue through 8/12 . Providian - opened 1/00 - transferred/closed - falls off 12/12 . Providian - opened 7/00 - transferred/closed - falls off 12/12 . HSBC - opened 4/03 - closed 6/06 (they reported it stolen? and issued me a new card - and consequently a new account) - falls off 6/08 10 Positive accounts still open (NEVER late) . Barclays Bank - opened 12/06 - CL $800 - bal = $0 . Cap1 - opened 4/05 - High Balance $192 (CL $500) - bal = $0 . Credit One Bank - opened 7/04 - CL $750 - bal = $0 . JCP - opened 9/06 - CL $500 - bal = $0 . HSBC - opened 3/06 - CL $1500 - bal = $0 . HSBC - opened 4/03 - CL $1200 - bal = $0 . Target - opened 4/05 - CL $200 - bal = $0 . Tribute - opened 10/06 - CL $1000 - bal = $0 . WaMu - opened 11/06 - CL $3500 - bal = $500 . Home Depot - opened 3/07 - CL $4000 - bal = $324 The above is from Experian and gives me a true FICO of 691 - carrying less than 15% of credit utilization. I am negotiating on the derogatories to get them deleted either through Validation pursuits or PFD. The only one I won't PFD is the $1656 which is incorrectly reported and was falsely re-aged. I'm fighting that one to the end. As you can see, my oldest accounts on record are the mortgage that was foreclosed (from 1993) and the Amex card (from 1994) along with the derogatories I'm trying to get erased. All of my good accounts are very, very new - 6 of 10 opened in 2006/2007! Add to that a mortgage that will soon be reporting that opened in January, and a Home Equity line of credit (hopefully) that will show opening in April 2007. The other good accounts were opened only as far back as 2003 (1), with 1 in 2004 and 2 in 2005. If I delete the current derogatories, I'll still have the old f/c mortgage account and the Amex account giving me age, but the average age has to diminish significantly. Will the overall age trump the average age, or vice versa?
Your situation is a "stragegic" one! With the goal of a 720 FICO, I think you should go after removal of the most recent negs, and the most severe (Judgement) if you can. I think you should "pay" the unpaid COs just from the review perspective. Someone will review the actual credit report, and the "unpaids" are a flag, even though they are small amounts. This will help your score by lowering your "debt" amount. The other step to increase your FICO is to get the utilization below 5%. This is another "zone" where you scores are effected. The FICO scoring looks at your "age of history" both for oldest account, average age and most recent. The "average" for oldest accounts on FICO scoring is about 12-13 years. The "average" for new accounts is about two years. So, go after removal of the negs scheduled for drop off in 2010, this will have the most impact on your score. Pay off the balances on the unpaids if you can. Also push your utilization below 5%. You can probably squeak out FICOs over 700.
I've tried disputing the Judgment to no avail. Also, normally my utilization is below 5%. I normally carry a $0 balance on all CCs, but I had a couple that my payment didn't get to them before the statment went out. It's only cost me about 15 points for 15-50% util in the past. Over 50% or too much on one card seems to cost about 20 pts apiece. So, you're saying complete removal of most recent negs (those dropping off in 2010), and paying the older ones so there are no unpaid balances remaining on credit? Removal of judgment would be ideal, but unlikely at this point. Keep utilization below 5% for optimum scores. Given the above strategy, I still have some paid negs, but they give me age. By they time they drop off, my good accounts have just that more age thus minimizing the impact as much as I can hope to.
You've got the idea, your main objective seems to be the actual FICO score as high as possible. You can start "timing" your repair to work with the aging of your good accounts. However, IF you are applying for credit, the COs should be paid off ASAP. You would like to gain as much "age" on a "paid" status as possible. As a rough rule of thumb, once a neg TL starts getting 4-5 years old, the age factor starts to help more than the "neg" factor.
Looking at your reports and accounts, I would try to get the negs scheduled for 2010 removed. Of course, no guarantee of removal, but "pushing" the negative clock back two years looks like it will help your score. In your case you have enough negatives that removing some will increase your score. Again, go after the latest ones currently. My guess is a 10-20 point increase in your FICO if these came off.
What is the effect of having all derogatories reported PAID, vs one or more reporting UNpaid? In Experian's "PlusScore" simulator, I would experience a more than 40 point jump if I had no "Delinquent Balances Past Due Now"! That's their FAKO, so who knows how much effect if would have on my real FICO, but it looks like they think it would be significant. I'm torn between the drawn out process to eventually get things deleted and finally affect my score versus paying everything and having PAID reported in the next cycle or two. The only one I have a real problem paying is the Bank of America one. They've all piled on charges and have some problems in their reporting, but I'd just as soon pay and have the 40 point jump.
Here's an interesting article (to confuse you even more!) from Experian's study of credit scores and credit management: http://www.nationalscoreindex.com/ScoreNews_Archive_09.aspx To answer your question, remember you are looking at the "simulator", when you enter all negatives gone, it is not factoring shortening your average age of accounts. IF you could get ALL negatives off, you stand a good chance of a significant increase, BUT....even ONE neg significantly impacts your score (that behavior thing again). And the odds of getting all negatives off in a short time are very slight. In your case, I think you need to set some timelines for your credit needs, and make a plan based upon your best efforts and strategy. In other words, if you make a plan to go after a No Doc in 6 months, then set your plan based upon that, make the three scenarios of worst, most probable and best cases. The odds are you can get some of the negs off, but probably not all. Pick your battles to work within your plan.
Good article and good advice Biz! I think I've got the BoA account handled (deleted), and I've paid the ones dropping in 2008. I've sent a PFD letter to the CMI account that drops in 2009. That will get me all paid up on everyone. I intend to go after the 2008 derogs and try to get a delete after the fact. I know it's unlikely, but they'll drop w/in a year at worst, and at least they show paid and give me age in the meantime. I've got to live down the judgment through 10/08 and the foreclosure through 8/10 and they're the worst items of all, so I figure the others will hardly be a blip when a lender looks at them and sees them paid. If I'm current and can get them to look past the judgment and f/c, then I'm golden as long as my score is 680-720+.
A couple more topical entries: On 4/7 a mortgage lender pulled my credit and Experian showed a 691. I just got a letter from another lender who pulled on 4/24 and Experian showed a 699. I think there were only 2 things reported to EX that would affect my credit during that time. 1) my judgment from 2001 was changed to reflect "PAID", and 2) I added a new tradeline with Home Depot with a $4000 limit. The judgment is old, so changes aren't as dramatic, but the TL is new which lowers my avg age, etc. Upside on the TL is it's a larger limit than most of my others, so maybe that kicks in a little help. At any rate, a true jump of 8 points. TrueCredit actually reported my EX score dropping during the month of April. Next example for today is TrueCredit over the last month. My TC TransUnion Score has jumped from 628 to 647 over the last month and here is what would have affected that score: 2 new inquiries (total 8), a judgment changed to "PAID", 3 med CA's deleted, credit used moved from LESS than 15% to OVER 15%, and the new Home Depot account with $4k CL. My TC Experian Score moved from 574 to 555 to 591 with 3 new inquiries (total 10), judgment changed to "PAID, 3 med CA's deleted, credit usage moving over 15%, HD card @ $4k CL, and a new Lowe's account with a $1500 CL that TU/EQ aren't yet reporting. On EX's "PlusScore", it's dropped from 637 to 610 over the same period with the new Lowes card making ZERO effect. My TC Equifax Score moved from 654 to 658 to 625 with 5 new inquiries (total 14), judgment changed to "PAID, 3 med CA's deleted, credit usage moving over 15%, and the HD card @ $4k CL. EQ's ScoreWatch moved from 668-663-679-674 over the same period. It may have moved lower, but I've got to reset my alert score. The inquiries obviously hurt with EQ, most of the inquiries have occurred since December, but there's not much I can do about them. I guess the good thing is at 12 and 24 months, I'll see good improvements in my score then as they drop off.
Update: I pulled my FAKOs this morning and there is a single event that affected my score. One CC just reported a 0 balance and that dropped my utilization from 15.35% (over 15%) to 9.45% (under 15%). It has only hit EX and EQ so far, so TU isn't reflecting the change yet. TrueCredit shows +4 for EX to 595, +8 for EQ to 639, and TU remained at 647. Experian's MyPlusScore shows an 18 point gain just in moving from the 15-30% bracket to the 0-15% bracket. They went from 610 to 628. LESSON OF THE DAY: If you need a gentle nudge in your scores to make a better interest rate or qualify for something, find a way to get utilization under 15% if you're not already. Two other revelations: 1) TU dropped 2 inquiries, so my total is down from 8 to 6. They reflected no change in my FAKO score, however, remaining at 647. 2) On 5/8, Equifax increased my score from 674 to 682 for no apparent reason. They upped the score 2 days before a new account was added, and 2 days after they showed a balance increase on one credit line. The only reason I can think is if something might have crossed an "age line" (for lack of a better term). I set my target score alert to 681 for a few days and then 683 for a few days to see if it moved, but it hasn't since.
Obviously there are no 100% answers to the scoring model(s) questions, but in a case like yours, there do seem to be some "age" lineations, where score bump up as you move into another aging bracket. Also, some data furnishers only update every 3 months, and this only adds to the issue. Utilization is a huge part of the scoring models, and agin there are some defintie "categories". Nudging under a lower bracket can help, and sometimes this is managed solely by payment timing. It will be interesting to see how ALL scores are effected in September when FICO changes its scoring model (for younger people, and those with little history). Perhaps we'll gain a bit more insight into the workings of the model!
Is FICO changing their scoring model to compete with Vantage? It seems to me the VantageScore has fallen flat so far. I heard about it all last year, but nobody seems to be using it in place of FICO yet. I searched high and low all over the bureaus' websites to even find a reference to it and it was non-existent on EQ, just mentioned on TU, and EX was the only place I found that I could pull it. By the way, my VantageScore is 711 (at EX). They grade that as "Prime" or "C". I guess that's supposed to mean I qualify for average rates as opposed to subprime, but don't qualify for the best rates.Oddly enough, Experian's PlusScore says that my 628 only ranks higher than 25.9% of US Consumers, while their VantageScore says that my 711 ranks higher than 42.12% of US Consumers. I guess in this case, the VantageScore seems a little more accurate and in line with my credit profile among the 3 bureaus together. I would rather they all just used FICO, but I guess that won't happen as long as there's a buck involved somewhere. Back to topic - FICO allocates 65% of your score to 2 categories - Payment history (35%) and debt outstanding (30%) with utilization rolled in there somehow. Vantage allocates 70% to 3 categories with utilization having it's own 23% while payment history still accounts for a significant 32% and 15% for outstanding balances. Bottom line: you can't have late payments, or overutilize credit cards and have a good score. Case-in-point: My brother has never been late on anything in over 20 years. He has hundreds of thousands of dollars in available credit among myriad accounts. Lately, he's maxed out some cards buying houses (yes, buying houses on a credit card). His score has plummeted from around 790 to the 630's because of credit card utilization. Good news for him is that once they're paid off, he'll spring back to the upper 700's.
FICO is somewhat competing with the VantageScore, but FICO's new model is for people with little history (i.e young people, people who didn't use credit, people w/"thin files"). I am not sure what this will do to the "scorecards or buckets" used for "relative scoring", but it will be interesting to see! The goal was to simplify the scoring, and simplify credit "worthiness" into groups..."A,B,C...". I don't think this has worked too well....... Well, your brother is a great example of credit management, remember credit is a tool, to use when you need it, or can "benefit" from it. Your brother has great scores (as a baseline), and yes his scores plummet when he buys a house on CCs, but....I'm sure he doesn't care about that drop. His "tools" are there when he needs them. Your brother sounds financially sharp, so I am certain he would not want to use more credit after these purchases. I'm sure he'll complete the transactions, pay off the balances, and then he's ready for the next opportunities. In the long run/big picture, he is raising his overall "baseline" by generating strong payment history with these large amounts. Again, it is all how you manage your credit resources. We members here tend to obsess over any little change in our FICo scores, but the only true concern is where they are when we want to get credit. It no longer bothers me when I get a new car to know my FICO will drop, or if I put large purchases on my CCs. I now know when I will need, and apply for credit, and "manage" my credit and scores towards those needs. You are right, and credit does seem to go to those "who don't need it", but then again, who would you lend money to? Someone with no assets? or someone with the money already in the bank? Hmmmm....... Just keep focused on credit as a tool and resource, that has to be managed. Following the advice of sound financial management, focus on your scores when you PLAN to apply for credit, and give it enough time to attack any errors, or pay down balances.
Good Point! When you are looking to get some serious credit, they seem to look further than just the scores - and that's where my brother will get the favorable interest $100k loan with a 630 score where I won't with a 690. Like you always say Biz, real credit repair is about lifestyle changes and practices. I myself have been happy when I get an 8 point "leap" in my score, but that's only one piece of the overall puzzle. Creditwise, I'm reaping the rewards now of work I've done over the last 3-4 years. Sure, I've got score bumps all along the way, but it's only now that I can apply for loans with some level of confidence. It's only now that non-sub-prime credit cards are starting to send me applications. I've still got a ways to go, but it's the habits and practices I've built into my lifestyle that will get me there.
You are absolutely right! The amazing thing is how your "values" and priorities change....from not giving a second thought to not paying a bill, to being obessive that it's received on time! As I posted once before, the root cause, and hence corrective action, is changing the habits and practices. You have to correct what was wrong with your outlook and priorities. The rest comes on its own! Sounds like you're there!
Update: TransUnion just reflected my new CC utilization under 15% and bumped my FAKO score from 647 to 658. That's an 11 point gain just for credit utilization.
