How to F*** Up Your FICO Score

[ArcticSplash]

For the first time, FICO reveals exactly how many points you can expect to lose by doing stupid stuff:




fICO-reveals-how-common-credit-mistakes-affect-scores: Personal Finance News from Yahoo! Finance

[mixiboi]

And how much does it raise up if you get things fixed?

[Mr. Brooks]

LOL at FICO. Biggest scam on the face of the planet.

[ArcticSplash]

And how much does it raise up if you get things fixed?

You don't really ever get it "fixed" once it's broken, unless you like to try to scare creditors with frivolous lawsuits to get them to delete stuff.

Per the Fair Credit Reporting Act, negative/derogatory statements on your consumer reports (which include credit reports) have a maximum lifetime of 7 years past the date of first delinquency, except for bankruptcies (10 years) and liens (10-15 years).



FICO will give you back points incrementally after the SHTF. For a 30-day late it will have to age about a year for it to impact less, for a 90-day late it will take at least 4 years for it to start hurt less. A 90-day late is mega-worse than a 30-day late on your reports, so if you do start to go late, pay it ASAP.

Your scores don't recover much with tax liens and default judgments until after you settle the deficiency, then after it's been discharged -- about 7 years after that you'll recover a good portion of those lost points.


This is moot however, because for some people--especially certain employers--will react negatively to the mere presence of certain types of derogatories in your file.

For employment applications, you may have seen the question "Have you ever declared bankruptcy?" your answer probably should be "Well, can't you read? You're looking at my credit report, aren't you?"

[BenDee]

What's the 'return time' or 'half-life' of those scores? Hopefully two 30-day late payments isn't as bad as a bankruptcy, at least for more than a couple months.

[ArcticSplash]

LOL at FICO. Biggest scam on the face of the planet.

Perhaps... but try telling the lady who is underwriting your mortgage that.

[ArcticSplash]

What's the 'return time' or 'half-life' of those scores? Hopefully two 30-day late payments isn't as bad as a bankruptcy, at least for more than a couple months.

Lates are nowhere near as bad as BK, and after impact, recover a lot quicker than going bankrupt will.


FICO considers lateness as a good sign that you're headed towards default. Once you hit 90 days late, default on an account is a near-certainty, and so they really bring those scores down.

Bankruptcy ravages your scores because on a Chapter 7 or a 13 you're basically announcing to all your creditors that you're totally insolvent and can't repay your debts.


When you go bankrupt the creditors that you include in bankrupt will get marked on your credit reports as IIB. This lets anybody know who pulls your credit report from now on that you "shafted" those creditors, until those tradelines finally drop off your report.


BK7 is a total liquidation of your assets. Whatever is there is distributed to creditors (for most personal BKs, there is nothing).

BK13 is the repayment-plan version where you make a partial restitution to your creditors through a trustee.



Believe it or not, during the go-go housing boom, plenty of lenders were willing to overlook bankruptcy and extend credit, so long as the bankruptcy wasn't very recent (like within the last 4 years).

People even bought houses who were recently bankrupt... thanks to folks like Countrywide.

Oops.

[ArcticSplash]

What's the 'return time' or 'half-life' of those scores? Hopefully two 30-day late payments isn't as bad as a bankruptcy, at least for more than a couple months.

All the FICO score was originally designed to do was to put a "magic marker" over your head to predict how likely it will be that you make whole on a debt when borrowing money. If your score is 582, chances are pretty damn good. If you're 780+, chances are very low.


The FICO model though is complete trash during periods of economic upheaval, like what we got now. If unemployment ravages the country, it doesn't matter if a borrower has a 760 FICO score. He could lose his job tomorrow.

FICO doesn't tell you how likely a borrower will earn income to pay his debts in the future, it just tells you how good he was at paying his bills with the income he had in the past.






Unfortunately for many of us, credit reports and scoring has now jumped out of the world of consumer finance and the data is being used as a crystal ball for quite a number of unintended things.... like employers trying to use them to determine if you're worthy enough of employment (and earning the income to pay your debts in the first place).

In a way, this new use of credit reports for insurance risk scoring and employment has convinced a lot more people than normal not to borrow money excessively. That could be a good thing in the long run.