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Impact of Sold-Derogatory Trade Lines on VantageScore 3.0 Credit Scores

This study demonstrates that excluding sold-derogatory debts from consumer credit files does not cause undue inflation of VantageScore 3.0 credit scores.

VantageScore Solutions undertook this investigation in light of compliance concerns that prompted some lenders to reconsider the way they report sold-derogatories — delinquent accounts sold-off to debt collection agencies — to the three national credit reporting companies (CRCs). Some consumers have complained that these debts, known as “sold-derogs” to the credit industry, persist on their credit files even after they have been discharged through bankruptcy. As a result, some lenders are considering eliminating all charged-off accounts sold to debt buyers from their reporting to the CRCs.

Concern that excluding this information from credit files could adversely affect credit-scoring accuracy led several lenders to ask VantageScore Solutions to look into its impact. The question at hand: Do consumer credit scores significantly increase with the removal of the charge-off data?

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