November 25th, 2011

How Do Small Collection Accounts Impact Your Credit Score?

3d rendering of handsets from an old vintage phone

Fortunately, there is one recent change to the world of credit scoring concerning small debts, which are sometimes called “nuisance” collection accounts.

Fair Isaac, creator of the FICO score, has rolled out to all three credit bureaus its newest general-purpose FICO score, dubbed FICO 08. With this new version of the credit score, FICO says its will disregard collection accounts and other dings on your credit file when the original balance owed was under $100.

The logic there,” says FICO’s Tom Quinn, “is that for small dollar amounts, like a collection notice from a public library system, the (credit scoring) model will now bypass those and not consider those to be negative. Any kind of derogatory public information that’s less than $100” will be excluded, Quinn adds.

This certainly has the potential to help boost your FICO score if it was impacted by such a blemish. But beware: amid the credit crunch, every single account you have, and every single financial transaction you engage in is being analyzed to determine your credit worthiness.

Originally posted here.

About the Author

Socialtik Mag
Socialtik Mag is a progressive platform for young, aspiring professionals to express our views on the issues and ideas in the world around us. It’s the Gen-Y perspective of life in the new decade. In addition to the original content we produce, we post from sites around the internet to keep our peers aware of what’s positive, what’s fresh, and most importantly, what’s progressive.



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