FICO Score: Does the amount of my collection account impact my credit score?

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FICO Score: Does the amount of my collection account impact my credit score?

FICO Score: Does the amount of my collection account impact my credit score?

We know that having a collection account on your credit report has a negative impact on your FICO score

But does the amount of the collection account affect your FICO Score?

The answer to that question is no.

From a FICO scoring standpoint, the amount of the collection account is not important. 

Whether it is $50, $500, or $5,000, it does not matter.

Both small amounts and large amounts have the same negative impact on your FICO score. 

At least that’s the general rule.

There are occasional exceptions, but generally, the amount does not matter

FICO just cares about one question.

Do you have a collection account?

Yes or no? 

If the answer is yes, then they ask if you have another collection account.

Whether those are $500 or $50,000, the amount is not important. 

The only figure that matters is the number of collection accounts in your name.

There is an unbelievable number of different scoring models.

Some of the newest models will ignore a collection account if it has a $0 balance.

However, many lenders use some of the older FICO scoring models that do not ignore a collection account with a zero balance.

All that matters to them is the number of collection accounts.

Regardless of the balance, if there are multiple collection accounts, then that’s going to bring down your score in most of the older scoring models.

Now, it certainly could affect more than just your score. 

If you are applying for a mortgage or auto loan, you will typically need to go through underwriting.

Underwriting takes a more detailed look at your history than just a FICO score.

If you’re trying to get a home loan for $200,000, and you have a $50,000 collections account, that’s going to trigger somebody in underwriting asking questions.

But just from a credit scoring standpoint, whether it is a little bitty collection account or a ginormous collection account, it’s all the same. 

This is one reason why it’s so important to get these collections accounts off of your report.

Even if they are only $10 or $20 collection accounts on your report.

I have literally seen somebody do this.  It is outrageous that anyone would put a $20 collection account on your report.

I have also seen many $50 collection accounts for medical copays and deductibles.

It’s really important to get these small accounts off your report because from a credit scoring standpoint, even those tiny ones can have an enormous impact on your credit.

We have other posts that discuss in detail how to get rid of these accounts from your credit report:

In this article, we just wanted to answer this one question: Does the amount of the collection account matter for my FICO score?

And the answer is generally no.

Both small amounts and large amounts have the same negative impact on your FICO score.

We hope this is helpful to you!

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Thanks and have a great day!

 

John Watts

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