After analyzing tens of thousands of credit reports, one conclusion is all too clear: any negative event will severely lower a FICO score. But how much?
The best way to understand how much lower is to remember this one key thing: the higher the start, the farther the fall.
For example, if an 800 FICO score gets one $10 medical collection, the score will drop close to a 100 points. This effect of this same collection on a 680 FICO score is about half: around 50 points.
Paying the collection does not get any points back in either case.
Some would think that a 30-day late is just a minor boo-boo. After all, maybe it was only on a little department store card with a monthly payment of $15.
In reality, scores will drop significantly – enough to dramatically change the terms of a mortgage or an auto loan. An 800 score will lose up to 70 points on that 30-day late. For a 680 credit score, the fall is about 50 points.
Always remember this, there are no boo-boos in the credit world, only bombs and bigger bombs. You must be flawless in paying bills on time; you must avoid anything derogatory.
Few things in our lives require absolute perfection every day, every month and every year. Credit is one of those things.