Question on Credit Scoring
Date: Wed, 07/13/2005 - 12:35
There is nothing new on my reports except that they're showing the two collection accounts as being paid in full. The only thing I can think of is that one of the collection accounts was two years old with no activity over the past two years(it was a medical bill we had no knowledge of until last month) until we paid it off. Did the recent activity of paying it off bring it to the front of my credit report and therefore make it a NEW negative mark even though it was initiated so long ago? Can anyone think of any other reason my score would drop so much when I've actually made good on these accounts? Shouldn't that have raised my score?
Thanks for any advice,
kimb515
Hi Kim It is a fact that collection accounts lower the credit
Hi Kim
It is a fact that collection accounts lower the credit score as it is a negative entry in the credit report. When you make the payments on your collection account, it will be shown as "collection account" in your credit report. But after you have completed the payment as you said, you need to see if it is showing as "paid collection" in your credit report.
Although the collection account will remain in your credit report for 7 years from the date the payment was missed, but this status of "paid collection" is much more important as it will be giving a good impression of your credit to the creditors. The crux of the matter is that you have completed your bill payment which was in collection and it has to be shown in your credit report in the proper way. It will mitigate the negative impact as it may have in your credit report.
There are some other factors which lower the credit score. Please check if you have done this in the recent past:
Applying for several credit cards or loans within a short time span could hurt your score. These are termed as inquiries and can stay in the credit report negatively. It is important to keep inquiries to a minimum.
- Check for incorrect entries by reviewing your credit report at regular intervals.
- Timely payments help in retaining good credit scores.
- It is always beneficial to reduce the credit card balances as much as possible. The FICO scores get affected due to how much money you owe on some cards relative to your total credit limit. Credit scores are seen improving if the balances are kept below 25% of the credit card limit.
- It is suggested not to increase the ratio by closing an account and transferring the remaining balance to another account since the ratio of the credit card balance is linked to the credit limit. Doing this will lower the credit score which should not be generally done while you are on your way to increase your credit score.
- While you are applying for a loan, it is suggested not to close any unused account. At the same time, it is suggested not to open a new account also during that time. It is said because if you are having a short credit history or less number of accounts, the credit score gets lowered when a new account is opened as there is no proven track record of it.
Please let me know your feedback and remember to see the status of your collection account. It should be "paid collection" in your credit report.
Regards
Roxette
