Would have preferred that FICO never got involved and it was left up to the consumer and the potential lender to work out a deal.. noadays, you have brainless reps behind a phone relying on the "accuracy" of their third-party bought credit score. What a joke this system is. I get that the risk is completely with the lender, but the parameters where created as a secret sauce when FICO got involved.
brighterfuture's response was:
Never, ever, ever, ever (couldn't say it enough) give out your bank or other account details for auto-payment for any debt you are behind on. They will do what ever they want knowing you are in trouble. If they mess up, your risk, your problem. Only way out of this if they do not agree to help fix it is to contact you state Attorney General or court.
brighterfuture's reply was:
@CK Moderator - it about debt, not just the ability to pay back a loan. They use it to determine the risk of how well you will pay a loan back, but the score is about everything related to a person's credit such as how much you hve open, payment history and how ofter you close or open credit lines. If you close an account, it causes a score to go down, not up (ex: I paid two mortgages off in one month - my score dropped almost 40pts. Nothing else changed). This entire scoring system is a joke to the consumer. Its about another avenue to revenue for the credit reporting agencies and credit scoring companies.
@gogreen1716: the thing about waiting is that the balance will be registered on your credit report, impacting your score. If this balance is above 10 or 30% (depends on who you talk with) then it will negatively impact you score regardless if you pay the entire previous balance off. Continue paying off the balance and keep the balance below 30% and your score should do fine - from what I learned.
Paid off items do not just go away. They are part of your credit history and remain on your report for a finite period of time. Normally the reports state when items will be removed. I think the usual for revolving and installment accts is 7 yrs beyond their last activity, bankruptcies are 10yrs. If the loan is in good standing, there is no need to worry about it. It has already made its mark on your report and score. Its the bad items updated monthly you need to worry about.
I agree with tcsgirl. Old debt no longer active has already done its damage. Current debt is most important to keep in good status.
If you plan to take on old debt you need to take into consideration the status of each of the debts. Debt with a status of Charge off are beyond fixing. Even if you contact them, if they are legit lenders, they will not even deal with you on the debt any longer. They will state it is closed and sold or charged off. The new debt holder, the junk collectors, are a different story. If they are posting monthly as though it is a truely active debt, then you need to do something about it like fight it as being legit (wite validation letters for instance), or pay if off. However, you also need to take into consideration the length of time it has been on your report. Normally, your report will state when the entry will stay on your report for. If the time extends beyond when you want to get a loan, then you probably should settle it or fight it off your record as it will look better being resolved then liguring there. Also confirm the length of time is within your state's statues of limitation.
Taking on old debt can take sometime but you have resources and options available such as settle offers, lawyers, state attorney general, etc. It all depends on how you want to handle the entry.
Thanks MonocleCollector for the link. At first it didn't seem all to informative, but then I got to the end and read thru the example. Wow! Obviously this is only one method for calculating risk and approval, but it definitely sheds additional light on the subject that: (1) the number of inquiries in a certain period of time are taken into into account; (2) risk is increased if they feel the length of time for the loan is longer than they feel comfortable giving it - which raises additional questions; and (3) their is the potential for every financial institution to have such a grading scale. This is something I would like to know more about.
Perhaps this is a good time to asking everyone reading this to raise the question next time they request a loan. Get the details such as what the example shows from the link provided by MonocleCollector
- loan grades
- loan limits
- risk factors such as inquiries
...and how they factor everyting each step of the way resulting in the final result which approves or not approves the loan request. It will most likely be a struggle, but if you are inclined and are successful, please share the results.
because the scoring models are not consumer friendly, but lender friendly. You have to look at the score in a differnt way. Paying off debt faster than usual or closing accounts is not a good thing for lenders as they want you to pay on their terms. That is how they maximize profit. It is a business, not a friendship. The score helps them determine if you are credit worthy. Paying off debt sooner is not good for them and therefore your score decreases. I had the same problem when I paid off my two mortgages decades early. I lost almost 40pts.
could be a month, 2, or 3. Depends on when they report the new status.
I recommend that you don't even use it. Using it and paying it off will result in a balance being reported each month. Even if you pay it off. You wnat the immediate boost it gives then start to use and ay it off every month to show activity. getting it alone will result in a 20-40pt jump in the next 1-3 months. No need to use it 'til then.