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Jon

How much impact can a collection have on my credit ratings?

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Posted (edited)

My FICO is currently over 770 and I like to keep it that way.  But recently, I have a charge that I am disputing with a car rental agency who claims I owe them, and is in the process of forwarding me to a collection agency.  So my question is, at my rating level, how much of a negative effect can this cause?

Edited by Jon
Correcting title

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As with all things FICO, it depends on a dozen other variables.  How high is your utilization?  Any other baddies on your report?  Those are the main things that impact scores, anyway.

 

In one case, you might see a 40 point drop - if your util is high or if your profile is thin, for instance.

 

In another - say you've got zero baddies, and less than 10% util across a thick profile, the drop might be 25 points.  Or less.

 

How much has been done re: disputitude so far anyway?  Make sure you're all read up on the FCRA.

 

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My Dad had a 775 TransUnion FICO 8 Score with 60+ years of credit age, perfect payment history and less than 5% utilization and no active installment loans. He was an AU on one of my Mom's store cards, there was a problem with her payment posting and her account was ultimately reported as 30 days late.

 

When this one 30 day late hit my Dad's reports, his TransUnion FICO 8 plummeted to 659 with no other changes to his reports other than this one late and it was his only negative ever! We did get this all resolved, however a collection will hurt your scores much worse than a single late.

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The general rule is that the higher you are, the harder you fall.

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The other CRITICAL key on any manner of collection is to ensure that a timely WRITTEN and SPECIFIC dispute is submitted to the entity trying to work the paper.  This will generally help to forestall any reporting of the matter to the four major bureaus.  Too many people send generic tripe that allows for a generic tripe reply to quickly be returned...

 

The other question here is where the credit card issuer is in all of this.  Alternately, if this is a damage-related claim, where is your insurance carrier in this?  There attorneys should be going to work for you as YOU are THEIR client. 

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due to the impact of segmenation, moving from no derogs to one major derog will hurt.

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Posted (edited)

I have a 770 FICO with EQ (via MyFICO, the others are around 760).  On the Myfico site, they have a pretty detailed score simulator.  If I were to have a collection added to my account, they estimate a score drop of 65-75 points across the three bureaus, bringing me down into the 690s.  In my estimation the drop would be even more.

 

This goes beyond scores however, as many times you will not get approved for credit if you have any recent derogatory items on your report, regardless of what your score is.  So even if you only drop to a 740, you may find difficulties in getting approved due to the collection.

 

TL/DR - Do whatever you can to keep that off your reports.

Edited by CTSoxFan

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A new collection on an otherwise clean report (which should result in > 760 FICO) can drop your score 100+points. I did a test with 800 FICOs putting close to 30k on a 18k "flex" account and my score dropped almost 90 points. It recovered almost completely as soon as I paid it off and it reported.

 

A new collection is worse.

 

The higher the score, the bigger the impact of any negative.

 

 

 

 

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Right at the first of the year I had a collections account appear on my TU and EX. It has since been removed but it caused me to drop from the low 700’s to the low 600’s.

 

Over 100 point drop.

 

Nothing else negative is on my reports.

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