Okay here it is…….
Let me clear that question up a little bit. According to FICO how long does it take for “credit recovery” if you have a Foreclosure or Short sale? The research I’m going to discuss in this blog will BLOW your MIND!
Observing FICO’s scoring model over the last few years has really led me to believe that the algorithm is broken..
FICO did a study and simulated various types of scenarios concerning mortgage delinquencies. The study compared three different credit profiles. Consumer A has Fico score of 680, Consumer B has a 720, and Consumer C has a 780. Each consumer had an credit profile actively reporting “Paid-as-Agreed” for their mortgage file. The similarity for the three consumers were: how the consumers utilized their credit, the delinquency history, and the age of the files.
Look at the impact that ONE 30 DAY LATE PAYMENT can have on your credit score! Consumer A’s credit score dropped approximately 80 points because of a 30 day late payment. Consumer C also had a 30 day late payment and the score changed from 780 to 690. Because of ONE 30 DAY LATE PAYMENT these scores dropped approximately 100 points! This can be devastating to a person who has been working very hard to keep their credit above board.
According to the chart above, Bankruptcy lowered the scores for all three examples to the mid 500’s. A short sale can reduce the score about 50-70 points. A short sale will show up on your credit report as a deed-in-lieu. Consumer B suffers in loss approximately 115 points and Consumer C’s loss was in a range of 105-125 points without a deficiency balance. Consumer C looses up to 160 points with a deficiency balance.
Which is why our sister company can help with serious situations like this. Feel free to visit them at www.a1ediscovery.com for any questions. There are several regulations that must be followed when addressing short sales and foreclosure regarding electronic discovery (e-Discovery). Not being knowledgeable about e-discovery can cost you a fortune. E-discovery has been described as the “disclosure or discovery of electronically stored information (ESI), including the form or forms in which it should be produced…”
The magnitude of FICO® Score’s impact is highly dependent on the starting score. The higher starting score, the longer it takes for the score to fully recover.
Let’s see what FICO says about “How long does it take for Credit Recovery?”
There’s no significant difference in score impact between short sale/deed-in-lieu/settlement and foreclosure. While a score may begin to improve sooner, it could take up to 7-10 years to fully recover, assuming all other obligations are paid as agreed. This is the scoring system as far as FICO is concerned. According to the chart Consumer C could be in financial prison for 3 years for one 30 late payment!!!! In addition to a late payment on a mortgage, some individuals may have a Repossession, Tax lien, and Student loan delinquency. These things can destroy your financial portfolio.
This study provides good benchmarks of how a credit score can be impacted from mortgage delinquencies. It is important to note that research was done only on select consumer credit profiles. Results may vary beyond what’s in the charts above because of the wide range of credit profiles that exist. Source FICO.com
The Fair Issac Corporation doesn’t seem to “FAIR” do they? So what can you do?
Credit Masters Challenge 100% of ALL negative items placed on your credit profile by the Big Three Credit Reporting Agencies (CRA’S) Equifax, TransUnion, and Experian. The items are challenged by using a law called the Fair Credit Reporting Act of 1971. This law was design to protect us as consumers from the CRA’s. The law says you have the right to challenge all negative, inaccurate, erroneous, obsolete information on your credit reports. You must Police your own Credit.
Credit Repair or Credit Restoration often times is NOT enough! What happens if the item is deleted from the credit report and re-inserted on the report? What are you going to do? That’s why we go to the ROOT of the credit issues.
Therefore, we want ALL the electronic information related to your file so we can validate and verify during our forensic audit process. Nothing against Credit Restoration however the truth is sometimes you need to go a step further.
Metadata within e-Discovery
Unlike traditional paper discovery, electronic data files will include “metadata,” or what is known as additional hidden data.
This valuable information does not appear on the printed copy of an electronic file. Metadata is found in e-mail messages, word processing documents, spreadsheets, audio, video, and other digital files.
Think about metadata in this concept: If your credit card debt was assigned to a third party collection agency or collection law firm, you have a duty to request, and they would have a duty to disclose, any information relating to the assignment of the debt over to the third party collector. Under the Fair Debt Collection Practices Act, you can request the name and address of the original creditor, and the original contract that you had presumably signed as a contract for the debt.
AND when this is done right this could be a game changer for you!
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