NCO utility collection after move lowers FICO scores by over 100 points

My client moved last year, didn’t get a bill and all of a sudden there’s this NCO collection on his credit.  He panicked and immediately paid the utility company. THEN he found my websites and I just drafted the disputes for him.

NCO reports only to Experian and Trans Union, so his Equifax report is “perfect”.

The Equifax score is 781:

Equifax

Top Negative Factors

You’ve recently been looking for credit.

Your applications for credit in the past year 2 inquiries

What’s helping your FICO score

Top Positive Factors

You have no missed payments on your credit accounts.

Number of your accounts with a missed payment 0 accounts

You’ve limited the use of your available credit.

Ratio of your revolving balances to your credit limits 1%

You have an established credit history.

Your oldest account was opened 8 Years
Average age of your accounts 5 years

You’ve shown recent use of credit cards.

Your FICO score evaluates your mix of credit cards [?], installment loans and mortgages. People who demonstrate responsible use of different types of credit are generally less risky to lenders. You helped your FICO score by showing recent use of a credit card.

Compare that to the 662 Trans Union FICO score with the NCO collection:

Trans Union

Top Negative Factors

You have a collection on your credit report.

Number of collections on your credit report: 1 Collection

You have a recent collection on your credit report.

Your most recent collection occured 4 Months ago

You’ve made heavy use of your available revolving credit.

Ratio of your revolving balances to your credit limits 24%

You have a short credit history.

Your oldest account was opened 8 years ago
Average age of your accounts 5 years

What’s helping your FICO score

Top Positive Factors

You have no missed payments on your credit accounts.

You helped your FICO score by paying your bills on time. Staying current with your bills will continue to help your score.

You have many accounts that are in good standing.

Number of your accounts currently being paid as agreed 7 account

Of course the TU score was even lower when the collection was more recent.

Should someone’s credit really be destroyed because of one paid $84 utility collection?

  • Another client with a 12/09 bankruptcy discharge also had FICO scores over 660.

Are they the SAME credit risk?

These ludicrous FICO scores are required for most mortgages and a MAJOR reason for the credit crisis. And nobody with the power to prohibit scoring cares.

Currently the collection still shows as unpaid, but having it reported as PAID will  NOT increase the scores by one point.

The FICO scores will go up as the collection gets older, but unless it is DELETED, it will significantly lower the scores until 2016.

I would not have recommended paying the collection without an agreement for deletion. While utility companies can be quite difficult, they usually agree to have the collector delete if there was good cause for non payment.  Not receiving the bill is definitely good cause and under the Fair Billing Act consumers do have LEGAL rights.

I see these utility collections after moves frequently because people rely on the post office to forward their mail to the new address.  Unfortunately, that OFTEN does not happen.

This client even called the utility company to inquire about an outstanding balance a few months after the move and they told him he didn’t owe anything.  I believe it, he had no reason not to pay them and he wants to get a mortgage.

The kiss of death:

MOST people would dispute this account as PAID, not knowing FICO scores rate paid collections just like unpaid collections.

NO FICO points for PAYMENT!

The credit bureaus would correct the reporting to “paid” and the damage would be almost permanent.  It’s much more difficult to get paid collections deleted.  Payment is generally construed as admission of guilt by the credit bureaus.

The PROPER dispute to credit bureaus and collectors:

Please delete collection [account #] as I did not receive a bill.

Hopefully, they will delete.  If not, I’ll have to contact NCO directly.

My client also didn’t get a collection notice from NCO.

Most collectors send a letter 30 days PRIOR to reporting to the credit bureaus and of course that’s the time to pay/settle accounts if credit is important.  Make sure you have their written or recorded promise not to report.

It is strange that my client didn’t receive a collection letter.  He has many open accounts reported on his credit — with his CURRENT address.

NCO obviously KNOWS that he is no longer at the address provided by the utility company.  Apparently they make NO efforts to collect OTHER than to destroy peoples’ credit.

UPDATE 8/30/10: NCO deleted from the credit reports.

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