After my Chapter 13 drops off, will my credit rating drop as well?

[shipo]

Hello folks, since my Chapter 13 Discharge in early March this year, I've been using this site and others to A) closely monitor my credit rating, and B) formulate a plan to rebuild my credit rating as quickly as possible. One of the things I was surprised at was my credit rating on the day of my discharge was 714; upon further analysis, it seems the high rating is due to the number of credit cards and lines of credit I'd had open for well over 30 years prior to filing for bankruptcy. When I look at my credit rating now, one of most consistent "Positive Factors" listed on my various credit reports, regardless of which service they were obtained from, is "Length of Credit History (How long you've had credit)".

My concern when I do a deeper dive on my credit report is all of those long standing accounts were closed during the Chapter 13, and based upon what I've learned from this site, they are slated to drop off my credit report on the second anniversary of my Discharge (i.e. March 2022). With my current FICO ranging from 685 on Equifax to 720 on TransUnion, I am pretty solidly in the "Good" range, at the moment; my fear is when those old accounts drop off in 18 more months, I'll drop from "Good" to only "Fair". Is this a valid concern, or will approximately 21 months of perfect credit history suffice to hold me in the "Good" category once I lose my long term history?

I know the above question isn't an exact science, but if anybody can opine on what they think will happen, that would be greatly appreciated.

[justbroke]

When the Chapter 13 drops off, you should see an increase. When my Chapter 7 dropped off, I certainly saw an increase (don't remember how many points). The reason is that these are held under Public Records and not related to your trade lines and collection accounts.

As you have speculated, the drop off of the "old" negative accounts could cause issues with your Average Age of Accounts (AAoA) and your overall length of history. However, my old American Express is still on my report so I show over 30 years of history. But that's not on each credit bureau as one of them no longer shows that old positive account. It's just a wait and see game at this point.

You can be in the 700s with only a 24-month credit history. Hopefully some of your older accounts, especially old positive paid and closed accounts, will stay (as they should). The key will be keeping below 29% (or 9% for best scoring) and keep building your positive payment history.

FICO scores are precarious and so difficult to read. I do know that an old collection account that drops off could cause your score to fall because it was helping the average age of accounts calculation.

It will be a roller coaster but there should be a bottom somewhere (in high 600s to low 700s) so long as payment history is perfect, no late payments (ever), and no bankruptcy reported. My 18yo stepson has a 719 credit score with one CapOne $500 credit card, and I added him as an authorized user on an older store card (2014 open date perfect history). He's looking to buy a motorcycle soon.

[shipo]

Thanks justbroke, great and thoughtful advice as always.

I have an interesting wrinkle which is about to show up on my credit report:

The bad:

• I obtained a CapOne Secured card with a $1,000 limit on it in early May; as you might remember from another thread, over the two months of the card being active, I had five "charged/paid in full" cycles which apparently triggered some sort of fraud protocol with CapOne and they held two of my five payments for nine days each. I was so annoyed with their holding of my payments, I closed the card less than two months after receiving it (they say they will refund my security deposit after two full billing cycles).
• After CapOne started reporting my (then) new card, my FICO jumped up by something like 20 points; as I understand it, as soon as they report I've now closed it, even though it was paid in full without ever carrying a balance, my FICO will drop by upwards of 30 points.

The good:

• I was approved for a TDBank Cash Visa with a $5,000 limit the day before I closed the CapOne account.
• I have no idea whether opening a second card so soon after opening/closing the first will negatively impact my FICO; but I'm hoping it will be for the better.
• My income is way more than sufficient for my needs; typical spending patterns are to charge roughly $2,500 and then to pay the balance in full just prior to the monthly billing cycle. As I understand it, that means I should effectively be at, or very near, a 0% utilization rate.

I do have another question for you regarding obtaining a mortgage, but I'll search the archives for an answer to that, and if I find nothing, I'll start a new thread on that topic.

Thanks once again for your advice.

[shipo]

Hey folks, this is kinda-sorta an update; after only six since my Chapter 13 discharge, all but two "Negative Reports" have dropped off my Equifax credit report. This is interesting for a couple of reasons:

1. My oldest five or six credit cards, all of which were opened in the early to mid 1980s have all dropped; this in turn cut my "Length of Credit History" from 38 years to 21 years.
2. While one of the "Negative Reports" is a valid reference to a credit card which was covered in my bankruptcy, the other report is for my wife's old car which was supposed to be in her name exclusively and which I never paid on nor did I include it in my filing. Not sure why it is there.

I guess the best news is my Equifax credit score jumped from 694 to 710; not sure why that happened either.

[sophieanne]

Hi shipo - that is a great update 😊. You still have a fantastic length of credit history so that’s good. Did you see the negative report regarding your wife’s vehicle before now? I wonder if you should put a dispute in with the credit bureau who shows this? Just mark it as “not my account”..can’t hurt you and at best it gets removed. On another topic, any update on that potential job you told us about?

[shipo]

Hi shipo - that is a great update 😊. You still have a fantastic length of credit history so that’s good. Did you see the negative report regarding your wife’s vehicle before now? I wonder if you should put a dispute in with the credit bureau who shows this? Just mark it as “not my account”..can’t hurt you and at best it gets removed. On another topic, any update on that potential job you told us about?

Regarding the car loan, I've seen it since I started tracking my credit rating earlier this year; I haven't challenged it as justbroke has said on more than one occasion challenging things like this might do more harm than good.

Regarding the job opportunity; this is probably going to be a several month process to get through the interview cycle. Given the position I'm being recruited for, I've been led to believe I might need to go through as many as a dozen interviews. Yeesh!

I'll keep y'all posted.

[sophieanne]

shipo - good luck as the hiring process progresses. I think disputing something on your credit report is a personal choice..I’ve done it, with no issue..but you have to make the decision that you feel comfortable with.

[shipo]

shipo - good luck as the hiring process progresses. I think disputing something on your credit report is a personal choice..I’ve done it, with no issue..but you have to make the decision that you feel comfortable with.

Thanks sophieanne, for the moment I don't see how that entry hurts, but hey, it might and I don't know it.

[justbroke]

The reason I say to use caution with certain things is that they could harm your score. If it is a positive item on your report, just don't bother disputing it. Positive items will remain on your report for a long time and they help your average age of accounts (AAoA).

I once disputed a negative item, but it was about 4 years old and helping my average age of accounts. After the dispute, my score dropped (around 20-40 points if I can remember correctly). I was expecting the opposite.

The FICO score model is so complex and even negative things, are sometimes keeping your score up. Yes, it is strange! But if it's a significant negative item I would dispute it. But if it has aged beyond 2-4 years, I generally don't bother wit them unless I have nothing newer than that item(s) (since it wouldn't affect my AAoA).

[shipo]

Thanks justbroke, in this case, the car was paid off over four years ago, in fact, the car she bought after that one has since been paid off as well. I just found it curious so many valid, but now closed, accounts were showing until a few weeks ago suddenly dropped off, but his one stuck around.

[justbroke]

Usually a paid, closed, and in good standing credit account could stay forever. While there's no requirement to keep or remove it, bad accounts definitely need to be removed within 7 years from the major derogatory event date. Public records, of course, have different reporting requirements than credit accounts (tradelines).

On one of my credit reports I have a 28 year old AMEX account. It was removed from my others. I can't explain it.

[shipo]

One more update...

Today I got an alert my credit score took a huge forty-something point hit due to the last account included in my Chapter 13 dropping off my credit report. The "Public Record" is still there, but everything else included in the bankruptcy is gone, and as such, my score dropped from a solid "Good" rating to well down into the "Fair" range. Annoying.

I guess the good news here is I was just approved (and have since received) a new unsecured CapOne QuickSilver credit card with a $3,000 limit, and given how new this card is, it hasn't been reported to the credit agencies yet. Once reported, I'm reasonably hopeful I'll bounce back up into the "Good" range.

Next question; when a "Secured" credit card flips from secured to unsecured, which my TD Cash card is scheduled to do next month, does that improve your credit rating at all?

[justbroke]

As far as I know, the FICO scoring model can't differentiate a secured card from an unsecured card.

Like I always tell people, bad things on your credit report can actually be "good" for your score (if they are old). What happened is that your score likely fell victim to re-bucketing. That means, if you have no bad accounts other than the bankruptcy, you are likely being compared to similar profiles.

[shipo]

Thanks justbroke, the only reason I asked is because my TD Cash card shows up as a "Secured Credit Card" on all of my credit reports, and I didn't know if the various scoring models took that into account.

Regarding my drop in score, I guess is the other bit of good news is there are no more accounts from the bankruptcy to drop off, so I won't need to go through this again.

[justbroke]

shipo I, personally, have never seen a distinction in the scoring related to a secured credit card and an unsecured credit card. I think that's the case -- and my personal opinion -- because FICO deals with your payment history, the age of the account, credit mix (installment versus revolving, plus real estate), and inquiries/new credit. The fact that the card is secured has no impact on those factors as far as I can tell.