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Monster credit drop in one month


Crunchyhippo
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After a long period of unemployment, my credit had fallen from around 720 to the 500s. I got another job, then it gradually climbed up to 665, 670 then 675. The only glitch during this time was that I missed three payments to my bank on my credit card (my job laid me off for a while), even though I tried to work out something with them. I found work again and started paying my set monthly payments on the card once more, including our mortgage, but the bank said that until I had "caught up" with the missed payments, they would continue to report me to the credit bureaus. Considering that the rest of my payments were good and on time, I had hoped that my next credit score might be 680, but to my dismay it had plunged from 675 to 608 in one month! This most recent month it fell yet again, down to 594! I couldn't even get a checking account with this score. I did get a copy of my credit report, but I'm not sure how to decipher it to see what specifically caused this massive drop. My wife and I made some sacrifices and managed to get current on our bank credit card so they'll stop reporting me.

 

I don't understand how, if the bank is the culprit for my drop, how it happened all at once in one month - and how one creditor can destroy your credit to such a degree in such a short period of time. It took me almost a year to get my credit up 70 points, yet it took my bank one month to drop it that far if they're the ones responsible. But, again, I don't know if this is the case. I'm hoping someone may know how I can make that determination.

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Welcome to CB!

 

There are sooooo many things that goes into the factor of the score that only knowing about 1 account won't be enough to figure this out. Also, the late payments will continue to report for 7 years legally, but that is not the only thing factoring into your score, and it will also hurt your score less over time.

 

What other accounts do you have?

What is your UTI/credit limits?

How old are your accounts?

What else might have happened (such as an older closed account aging off your report)?

What score are you looking at? (Is it a FICO score or a Vantage skore)?

 

I'm sure others will think of other things to ask, but that is a start.

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14 hours ago, Crunchyhippo said:

I don't understand how, if the bank is the culprit for my drop, how it happened all at once in one month - and how one creditor can destroy your credit to such a degree in such a short period of time. It took me almost a year to get my credit up 70 points, yet it took my bank one month to drop it that far if they're the ones responsible. But, again, I don't know if this is the case. I'm hoping someone may know how I can make that determination.

You don't indicate what the source of your scores happened to have been, but the bank is not the culprit.  The missed payments are the culprit.  Banks and creditors report their experiences with consumers, and a single late payment can be a very significant drop on a clean report.  On a report with other issues, such as yours seems to have given the score (regardless of source) being less than 700, fresh late payments can result in being dropped into another score bucket. 

 

The initial 30-day report is damaging.  If they reported a 60- and a 90- as they hit, then the damage continues downward to the sub-600 level. 

 

If your issues are truly just a single account that has been late and is still currently delinquent, then you MIGHT be able to pursue a Rule 5000 adjustment.  Some lenders will engage in these as the FDIC intended when the Rule was created.  This allows them to erase late payments where a consumer has shown a willingness to repay the debt that had not yet charged off.  Once the account was current within roughly a 90-day period of time, then they can remove the late payment history. 

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32 minutes ago, centex said:

Once the account was current within roughly a 90-day period of time, then they can remove the late payment history. 

 

I'm not taking the time to review the Rule verbiage just now (it's been at least 2 years since I looked at it).  However, I think you're potentially setting up an inflated expectation here.

 

My familiarity with Rule 5000 is that it merely permits a creditor to reset an account status to "current" without all of the payment deficiency having been caught up, based upon a series of consecutive monthly payments.  It doesn't not reset/remove past delinquency reporting in any respect or manner.

 

And, the truth is, I haven't seen any anecdotes of a credit card issuer extending a Rule 5000 adjustment in over a decade now.  (It's not mandatory, merely optional.)

 

To @Crunchyhippo:  Multiple delinquency notations on an account that was formerly "clean" can easily tank FICO scores 200+ points.  And, once on your report, time is a very slow healer.  It can take as long as 4 years of clean history to restore a score to the upper 600's once a major delinquency (90+ days) reports.

 

For this reason, whenever one suffers a setback that can be anticipated to result in more than a month of delinquency status, it can be advisable to proactively contact your issuers, temporarily suspend charging privileges, and enter into a comfortable hardship payment agreement on any outstanding balances.  Potentially, the creditor can suspend delinquency reporting provided you make all payments as specified in that agreement.

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While I know it is not mandatory, MANY lenders are still doing them, even if they don't refer to it as a Rule 5000 adjustment.  And yes, the short period of derogatory reporting was removed as part of the Agreement between the parties.  The key is that the account cannot generally have charged off AND the consumer needs to be in communication with the bank, ideally inside of the 90-120 mark.  Drag it out beyond 90 days and it is hard for the lender to believe the consumer has a good-faith intent to make things right...

 

 

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3 hours ago, centex said:

While I know it is not mandatory, MANY lenders are still doing them, even if they don't refer to it as a Rule 5000 adjustment.  And yes, the short period of derogatory reporting was removed as part of the Agreement between the parties.  The key is that the account cannot generally have charged off AND the consumer needs to be in communication with the bank, ideally inside of the 90-120 mark.  Drag it out beyond 90 days and it is hard for the lender to believe the consumer has a good-faith intent to make things right...

 

 

 

If this practice is still reasonably commonplace, people around here are being surprisingly tight lipped about having benefited.  I don't think I've seen any discussion of such an adjustment having occurred over on the otherwise very talky myFICO forum.

 

So, you'll understand that I hold my doubt that creditors are "still doing them" ... I would love for such doubt to be persuasively proven to be unfounded.

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11 minutes ago, hdporter said:

 

If this practice is still reasonably commonplace, people around here are being surprisingly tight lipped about having benefited.  I don't think I've seen any discussion of such an adjustment having occurred over on the otherwise very talky myFICO forum.

 

So, you'll understand that I hold my doubt that creditors are "still doing them" ... I would love for such doubt to be persuasively proven to be unfounded.

It seems that MOST around here blew the opportunity by allowing things to charge-off.  Too many who might otherwise have had a shot also get brainwashed by the 'be afraid of your phone' mantra some espouse. 

 

I've had some clients who I helped when they had a brief supervision issue and their SO didn't keep up the finances.  Capital One is the biggest name that ABSOLUTELY will reage the account.  They don't recognize it as a Rule 5000 though and you sometimes have to get to the second and third-level CSR AND be willing to make payment on the phone... 

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1 hour ago, centex said:

It seems that MOST around here blew the opportunity by allowing things to charge-off.  Too many who might otherwise have had a shot also get brainwashed by the 'be afraid of your phone' mantra some espouse. 

 

Addressing just this statement, it's unfortunate that most don't reach out for advice here until after everything has swirled down the tubes.  The fact is that every issuer has incentive to avoid a charge-off and if you constructively work with them when it's first apparent you won't be able to keep up with payments, it's possible to avoid the credit score killer of a charge off notation.

 

Of course, you still have to stomach some significant bumps in the road.  It's necessary to enter into a hardship agreement with the creditor, and some creditors won't consider discussions until you're 60-days, or even 90-days late.  Once you enter into a hardship agreement, most creditors will close your account (if not closed already) and typically require that you reapply for an account when you're back on your feet.

 

I suspect this puts off a fair share of "hardship" candidates, who instead decide that they'll try to bring the account current so as not to suffer closure, but don't have a real action plan that would be successful in that.  The truth is, accepting closure of the account is a far better alternative then ultimately having the account charge off and being closed in any case.

 

If you permit the account to be closed and enter into a realistic hardship repayment agreement, it's possible to make reduced payments without the risk of default/charge off.  And, if you're prepared to resume normal payments on the closed account under the account agreement terms upon expiration of the hardship agreement (and any approved extensions), then you can successfully return the tradeline to a positive status.  This means that after any adverse reporting ages off after 7 years, you'll be left with a clean tradeline with a long history (starting with the original open date) that will persist on your report for at least another 3 years.  The account goes from being a negative drag on your credit score, to being a strong positive contributor.

 

If, instead, you don't enter into a hardship agreement and the account ultimately is charged off, the best you can hope for is that the account drops 7 years after DOFD.  But there's no positive tail to the account; the benefit of any prior history is lost forever.

 

------

 

When our finances went tits up in 1999, as much as I was inclined to duck creditors I'm thankful that at least one creditor (I think it was Chase) went out of their way to posture themselves as wanting to assist and help me understand the potential benefit of entering into a hardship agreement.  (They also emphasized the importance of setting a payment amount I was confident I could keep up with.)

 

That set me on a path where I initiated contact with other creditors to explore the option of similar hardship agreements.  Where they wouldn't bite, I'd hang up and try again a month later.

 

In this manner, I was able to avoid any charge offs.  Of course, I had to suck up closure of these accounts and for the next 5 years, the only replacement cards available to me were Capital One's $500 "rebuilder" and Providian.  That made for some lean credit times.

 

However, as of 2004, the absence of any charge offs on my credit, along with the continued reporting of the hardship account history (including 4 years of recent clean history), means that my credit scores were back to 680+ and, once again, I could get a card with strong terms from most any issuer.

 

I think that's the "Gold standard" when it comes to rebuilding.  A little proactive management of a f'd situation can keep anyone from having to start over from scratch.

 

 

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I don't think my account had been late before when I missed those three payments (around $300 per month). We made the last two payments on time, but we weren't "caught up" with the three we missed. Two weeks ago we managed to pay the $900 to catch us up current, so they won't be reporting us delinquent anymore. Btw, this bank credit card is closed and has been for a while.

 

Having said all that, is the damage to my credit water under the bridge? Something that my bank no longer has any control over? Or do I have any options to raise my 598 more than five or ten points a month now?

Edited by Crunchyhippo
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19 hours ago, Crunchyhippo said:

I don't think my account had been late before when I missed those three payments (around $300 per month). We made the last two payments on time, but we weren't "caught up" with the three we missed. Two weeks ago we managed to pay the $900 to catch us up current, so they won't be reporting us delinquent anymore. Btw, this bank credit card is closed and has been for a while.

 

Having said all that, is the damage to my credit water under the bridge? Something that my bank no longer has any control over? Or do I have any options to raise my 598 more than five or ten points a month now?

if you have a balance on a closed account that will kill your utilization for FICO purposes. get it PIF asap.

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