Credit score impact of ignoring sold derogatory accounts.

Credit score impact of ignoring sold derogatory accounts.

What is the impact of a sold derogatory on your credit score?

The CFPB has been working very diligently in the credit industry and they actually have been doing some good things. One of the complaints that the CFPB is getting are how sold derogatory accounts are handled.

Currently, when a collection is sold, that collection should be reported as zero. The balance would be transfer to the new reporting company. What the CFPB is putting pressure on is how collection companies are reporting the accounts after they are sold. In response to this CFPB pressure the collection industry is actually considering not reporting sold collections anymore.

Basically when consumer’s collection accounts are sold to another collection company, the first collector would then not report the original collection anymore.  The collection account would come off the report. There still will be one collection as opposed to four, five or six collections.

They proposed that consumers would only have the one collection that was active the other ones would not report anymore. A recent study from Vantage said that the material impact of removing the sold collections is not material enough to reduce consumer’s credit score.

Vantage’s finding is that sold collections are really no predictor of your ability to pay. whether someone had five collections that were reporting on a consumers credit report or one it doesn’t predict how they are going to pay back the bill, it just predicts the behavior of the credit and collection companies that keep selling the data.

Hopefully, I believe that collection companies will stop reporting the accounts when the accounts are sold. In the future, if a consumer that had collection sold five times, it should only show up one time and then the other four will come off. It is not law yet but it’s something that they’re looking in to. They have evaluated the impact from a scoring perspective and it is really no impact.

Credit score impact of ignoring sold derogatory debt
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Credit score impact of ignoring sold derogatory debt (5)

 

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