Can a Collection Help Your Credit Score?
Can a collection help your credit score?
Hi everybody Dave Sullivan here for the Credit Guy TV. This time I want to talk to you about how a collection can help your credit score, when you have a collection that is 4, 5, 6 years old it actually can help you score higher. This is by design by the largest Credit scoring company FICO the main credit scoring company that most lenders use, Fannie and Freddie require lenders to use FICO 04 and you can learn more by clicking on this link about that.
FICO has 12 different score cards that your credit profile can be scored on when creating a borrowers score. Then a score is created. If you have a collection, that collection puts you on the collection score card will go ageist and a score will be created that is designed for people with collections on their credit report.
If you have an old collection and everything else on the credit file is in good standing since them it can actually help you. That collection will put you on an easier score card and you can score higher if you have one old collection.
That collection puts you into the collection score card, you actually wind up with a higher score than if you had that same credit profile with no collection on it. Without that collection you would then play on a score card that was a little more difficult because it was designed for someone with no collections.
That is how an old collection can help your credit score. Actually as that old collection ages off, after 7 years, your credit score can actually go down a little because you are going from the score card with a collection, that is designed for some one with a collection and going to a score card that was designed for someone with good credit.
That is how you can take a step back when that collection falls off your credit repository file. That collection can actually help your credit score.
This is Dave Sullivan here for the www,CreditGuy.tv. So you with a little bit of me, we are going to change the credit industry!
If you’re looking for other ways to improve your credit score please go to GetLoanReady.com you can get free videos and worksheets to increase your credit score from a more holistic perspective. Never Pay Collections
If you want to see more videos about credit and credit scoring check these out at www.thecreditguy.tv. If you are a mortgage lender please share this on your Facebook or LinkedIn page. If you have any questions, leave them down below I’d be happy to answer them.