I hear it often; “Medical collections don’t hurt my credit.” This is absolutely not true! This rumor has come from the fact that many lenders will not use medical against you, however they do use your score against you. And medical absolutely affects the credit score.
A Derogatory is a Derogatory, kind of like protestants believe a sin is a sin, a white lie or murder it’s the same.. and just as hard to grasp is that, one derogatory is no different than another when it comes to how it affects the credit score. Whether a $25 dollar medical collection or a $25,000 dollar repossession it effects the credit score the same.
The credit score when responding to a derogatory does not discriminate against the type of account and or the dollar amount. It treats them the same. The score seems to code each derogatory equally.
If payment history makes up to 40% of the credit score it’s important to know that all status of accounts are calculated with in it. Current accounts, paid accounts, late pays, collections, charge offs , judgments and etc. all become part of this infinite algorithm . And within payment history what makes the biggest impact on the score is the age of the derogatory.. The most recent 24 months having the biggest impact on the score.
I want this to really sink home. Much of what we build on and will talk about in the future will be based on these scoring principles. At this point it’s clear that the age of the derogatory is the most important impactor when scoring payment history.
Here’s an example: If John and Mary had identical credit, except John has had a $98 dollar medical collection on his credit that posted 2 months ago, and Mary had a $28,000.00 repossession 18 months ago. John with just a small medical has the lowest score!
Having attempted to lay some cement down on this, I’m not surprised to see so many people come to my office having paid other credit repair agencies frustrated with their results. So many of these other credit repair companies brag about deletions, the percentage they get off and etc. but here’s the facts, if you don’t get the right ones off it doesn’t matter. The score still suffers and you still can’t buy that home, or you’re still having to pay ridiculous interest on your loans and etc.
You could have 20 different derogatory on your credit and get 19 of them off, but if that one that is left is more recent, that score will continue to suffer.
It seems that the only other people that know this are the collection agencies as they use these dates legally and many times illegally to manipulate how the derogatory is aged with the credit score. I’ll write about this in detail on next blog and how to age accounts and the difference in aging collections vs. original creditor charge offs, As well as how these dates are commonly abused and manipulated by collection agencies.
We hear it often “Just pay your bills on time and you’ll be fine.” That’s absolutely true, but unfortunately collection agencies and creditors all too often are manipulating dates on derogatory making older debts score out newer, making the prospects of reestablishing credit very difficult.
I can’t speak for all the other credit repair agencies out there, although, most all seem to sing the same song. But I can speak with confidents with our processes. We absolutely pin point and target the most recent derogatory as high priority. Our emphasis is on the credit score and in order to get the score we’ve got to get the newer derogatory off first. We are also experts at finding and blowing the whistle on the subtle and blatant date manipulations that the collection agencies and even original creditors practice. I just get tingly all over when I think about how awesome our services are and how many people we’ve been able to help over the last 7yrs.