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Question on FICO simulation score


Mikep6126
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I recently obtained my FICO score from experian and ran a simulation. I have 13,000 in charged off debt that will drop off my report in 2009. The +

simulation tells me that if I pay off this old debt over the next two years my score will raise from 569 to between 729 and 759. One question I have is if I just let it drop off my report without paying it will my score raise similarly since there will be zero debt or is the act of paying off the debt what raises my score and not the fact that I no longer have debt. This is important to me because If my score only goes up to 650 when the debt drops off without payment or 750 with payment then it may be worth it to me to start making payments. My other question is wont it drop off either way after seven years? If thats so wont my payments be erased anyway? I hope this makes sense and I thank you for your responses.

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Not an easy question...

1. As a general rule, newly paid derogatories actually hurt your "sucker" score. I'm not sure why the simulator wouldn't take that into account.

2. Just because a debt falls off your reports doesn't mean somebody won't try to collect it. Even if its beyond the SOL for your state (unless you're in WI or MO), its still collectable.

3. If you do just let this debt fall off, your sucker score may rise...but, it still may come back to haunt you in other ways.

If you've got money to work with, I'd suggest you call the OC...tell them you fell on hard times, but things are better now and you'd like to pay them...but, it only makes sense if they delete themselves from your reports.

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First off thank you for your response....It is my understanding that in the state of Washington the SOL on a revolving debt is only 3 years and thus this debt would have expired and be uncollectable. Does that sound correct?

Secondly I do not have all of the money to pay off the debts on hand and would need to make payments. Wouldnt that make it difficult for a creditor to agree to removal?

Thirdly...If I did pay them off and they agreed to remove it from my credit wouldnt that negate the fact thet I paid them in the first place(according to my credit) and thus cancel out any effect it had on my score in the first place? Or is there some other hidden factor that isnt displayed on current records but kept in another manner. Like the age of your credit history or the average age of your accounts.

And finally when these items do drop off my credit report will the average age of my accounts drop with it since I have no new credit in the last six years thus negatively factoring into my score or is this information calculated to included all accounts past and present whether they appear on your file or not? My concern is due to the fact that it said this item had a very good effect on my rating.

I know its alot of questions but I hope I have made them clear and do appreciate your comments...

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I'm not certain about the SOL in WA. You're best bet is to go find the current state laws and read them for yourself. Laws change so often, you shouldn't rely on what you read in forums like this on the internet. Its also possible, that as in Ohio, Washington courts have recently found that CCs are actually "written agreements" and therefore the SOL is much longer.

I just reread your original post...I think the key phrase there is "over the next two years". Now it makes sense to me.

When an account is listed as a "negative" on your reports, paying it off gets you a "paid negative"...which hurts your scores. However, any negative hurts less as time goes on...two years sounds about right.

Credit scoring is a black box...we can only guess at what goes on inside. We form our guesses based on "push this button, get that output". In that context, having no credit listed is probably better than having paid bad credit listed. Paid old credit is better than recently paid bad credit. So, really hard to predict.

As to actually paying these accounts, again, no easy answers. If call the OC and offer payment, you could be restarting the SOL (again, check your current state laws). If you wait until the fall off your reports, your scores will rise (eventually), but, there will always be the chance that some junk debt buyer will latch onto the debt and come after you later on.

I guess I'd suggest doing nothing. If you haven't been contacted about these debts recently, they may just fall off by themselves. Deal with any JDBs later if they pop up.

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