Can you get an FHA loan approved with collections on credit report?
I want to buy a house using an FHA loan. My credit shows loan payments for the past two years have been current and on time. However, while attending college, I had two judgements placed against me.
Chapter 13 was not an option because I was told I would not be able to continue to receive the student loans needed to complete my education. I satisfied one judgment and I am in the process of making a debt settlement agreement with the second one.
My credit score is 652 most likely due to the unsatisfied judgement. I have been at my current job for two years in May of this year. That is when I would like to start looking.
I have no credit cards. Should I apply for one before shopping for a mortgage or wait. I did not want my score to be dinged due to a credit inquiry?
Will be able to get an FHA loan?
—Chris
Because your last collection account on your credit report is a judgment, you will want to be sure the court record gets updated that the account has been resolved. Does the other judgment you settled no show as satisfied on your credit reports?
Getting an FHA Loan with Collections on Your Credit Report
The home loan markets have changed in recent years. The housing boom bust and record foreclosures created an environment that tightened mortgage lending. And as of January 2014, most home buyers will want to be sure they meet the CFPB’s new ability to repay rules before you start shopping for a home loan. While this is not so much directed at you, it is good ground to cover for other readers:
1. Calculate your monthly income and expenses. Include all of your normal recurring bills (rent, car loan, credit cards, student loans, utility bills). In order to set yourself up for the best odds of getting approved for the loan, you want to have a DTI (debt to income ratio) of under 43%. This means your normal monthly recurring bills add up to less than 43% of your monthly income. Any legitimate outstanding debt collection accounts that show on your credit report are goingto skew your DTI and work against you.
Some banks will approve a loan if your DTI is higher than 43%, but it will depend on other assets you may have, and other outliers.
2. Credit score requirements from the FHA are about as forgiving as can be found. But the score you need depends on the loan you are applying for. At the time I am answering this, the FHA says you will not qualify with a credit score under 500. Credit scores between 500 and 579 can mean only 90% loan to value loans, and a credit score of 580 or higher is a good baseline floor for most borrowers.
Is 652 your middle credit score?
3. Collections and judgments on your credit report may need to be paid or settled. The debt to income ratio concern is addressed when collection accounts are resolved, but there are instances (more recently than I ever recall), where even if your DTI is well within what is considered healthy, your loan officer will indicate collection items on your credit reports are holding back loan approval. And this is certainly more likely with an unpaid judgment on the credit report.
You are settling the remaining judgment now, so be sure the court record is updated to show the judgment is satisfied before May.
How much credit diversity do you need for a mortgage loan?
I went into the above details so that later readers can get a grip on the issues that you seem to already have. And I am happy you have a realistic time frame and expectations (some people learn of collections on their credit report holding them back only after applying for a loan, and hope to still close in a matter of weeks). Your other question about applying for credit cards is more about diversity of credit.
Having established revolving consumer credit, like credit cards, is a small part of a healthy credit profile. Two such accounts are a normal part of a consumer credit profile, and are said to help enhance your credit scores (with all other credit score health benefits being observed).
Will the FHA loan you are looking at be more likely to be approved if you have more credit diversity with one or more new credit cards established? I do not think so. And you do run the risk of lowering your credit score for a few months as a result of new inquiries and accounts, even if only slightly.
It does not sound like you have connected with a mortgage lender or loan officer yet. I would encourage you to locate one you like and start the dialogue about your loan options in preparation for applying a few months from now. With the newness of the CFPB qualified mortgage rules, and ability to repay measures, there may be some minor things your lender/loan officer can help you get a head start on.
Anyone trying to resolve collection accounts on your credit reports in order to achieve credit goals, like a new home loan, is welcome to post about your situation in the comments below for feedback.
About Michael BoveeMichael started CRN in 2004 with a mission to provide people in need with detailed debt and credit help and education. Michael has participated as an expert panelist in federal consumer protection rule making, collaborated on state law changes governing debt consolidation, has worked as an expert witness in court matters related to the debt relief industry. He is available to speak with you about your financial struggle and helps people resolve their debt problems daily.
Hi Michael – I have had clean credit history for the past two+ years. The two+ years prior were pretty bad. The question is…can we successfully get approved for an FHA loan…with near perfect two year credit performance, plenty of income, plenty of DTI room (35% AFTER the house we’re under contract for), middle low score of 670, plenty of money for closing, and (new construction time) a commitment to having 2-3+ months of the new mortgage payment saved at closing (with documented proof of consistent savings to support that)…DESPITE an absolutely terrible credit performance 3-5 years ago (2016 – 2018)? More details below:
The recent two years, no lates, utilization hovers around 3-6%, no new accounts, no closed accounts, no inquiries, etc. My middle score is about 670/675. The DTI with the house we just went under contract for puts our TOTAL DTI AFTER the house at 35%. My fiancée and I both paid off our cars last year and decided against getting new ones (I was rear ended and lost mine, totaled) for now, and our credit card payments are all at the minimum. So in short, our RECENT profile of 24+ months is almost as good as it could get?
The issue is my (just me) 2016-2018 profile…I had a charge off (went into C/O status in April 2018, paid off February 2019), a collection (went into collections April 2016, starting paying immediately, paid off in full February 2019), a credit card that went 120+ days TWICE in 2018 (basically made two payments on the card in all of 2018 :(…the card has been paid on time and current for 2019 and 2020 so 24+ months at this point)..and then about 6 total other 30 day late payments spread across 2016-2018 (my car, 2 other credit cards…most if not all of them 2016/2017).
2016-2018 was a struggle for me as I was fresh out of school, moved twice, took out loans and ran up credit cards to fund those moves, went through salary cuts etc. I finally landed a solid job in 2019 and took all those lumps and came up with strategies to get out of trouble and stay out. My last data point I’ll add is that at my worst I was around 530 FICO. Today my 3 are about 680 675 and 670.
I really just want to know how underwriters will view me. Am I the model citizen for recovery, or am I still a disgrace to the entire credit and lending race?
Everything you pointed out that went wrong is not longer an issue.
Those resolved collections should not prevent an FHA loan (or most conventional for that matter).
Good luck!
Hi Michael…..i was all ready to send in my paperwork for a first time homeowner grant with the Town of Brookhaven in Suffolk county NY when i learned yesterday that you can’t have any collections on your credit report. Needless to say i am very disappointed. I also have one late payment to capital one from Dec. 2019. I called to try and settle this collection it is for $3823. but the lowest they will go is $2686. If i pay this i won’t have the $3000 i need for the home owner grant. Should i just pay the collection company this money and then just keep saving and try in about 5-6 months for an FHA mortgage…my scores right now are 604 transunion, 578 experian and 598 equifax. The deadline is November 30 2020 for the grant….i would really appreciate your input
When did you stop paying in the collection account?
Who has it now if not the original creditor?
HI there! We are just about to start the pre approval process for a standard home loan. Our credit score was just over 700 when Spectrum MISTAKENLY reported $150 balance to our credit reports. We have gotten them to admit it is their mistake and we are trying to get a letter. We talked a few different loan officers over the past week. One said we absolutely need to go on to all 3 bureaus and dispute this Spectrum charge. The second one said to absolutely NOT add disputes because the lender will only ask that they be removed (my understanding is it takes that account out of the scoring model and why would a lender want an inaccurate report). The second one seems to make logical sense. What are your thoughts?
I have seen many a lender ask for disputes to be removed from reports before loan approval.
I would work with the business furnishing the bad information to the credit bureaus to remove it quickly. Their letter can be used by your mortgage broker to do a rapid re-score.
Thank you so much for your response. Good, that was our thought and that was the opinion we went with. We should have pre approval in hand later today! Spectrum did admit their mistake and guess what, it’s already been removed from one bureau! It brought my husbands score up 35 points! That was just 5 days after we talked to them so we are thinking this is a good sign. We may have to do a rescore but that’s okay!
I am currently looking to purchase a home soon and have started the process with a lender. My student loan is no longer showing on my credit history as it has been way over 7 years and my current credit score is 631. My student loan is currently in collections and my lender said in order to be approved for an FHA loan I would have to either pay the US Department of Education in Full which my current balance is $15,600 with fees and cost and my principle balance is $11,680 or call the US Department of Education and set up a payment plan and ask if they would send me a letter that a payment plan has been started. My question is, if I set-up a payment plan on the large amount, will I be able to get approved for an FHA loan? What should I do?
Yes, that is pretty common to see happen when you have a government debt you have not paid, and are asking a government agency for something, they can and do require a resolution to that old debt.
FHA regularly approves mortgages after you follow through with what they are asking you to do.
Hello Bovee,
I am currently looking to purchase a home soon and have been trying to clean up my credit to get approved. I have paid off most of my 10 collection/charge off accounts with the exception of two, one that I am trying to settle for less than the balance (current balance $3,812) but unable to get in contact with the company to try and settle and the other is a balance of $19,757.00 from a car accident in Dec 2018. My question is, if I set-up a payment plan on the large amount, will I be able to get approved for an FHA loan? Also, will paying the other 8 accounts off raise my credit score once the balances have been updated (disputed with the 3 credit bureaus to have creditors update)? My current Vantage scores are Experian 587, Equifax 584 and Transunion 595. My Experian FICO score is 616.
One more question, I do have an old apt balance of about $5,700 that is not showing on my credit report but was seen when applying for an apartment, do you think that will show up when applying for a mortgage?
Thank you
You can often still get an FHA loan if you show you have been making regular payments on past collections that are part of a payment agreement (90 days of payments already made is preferred).
Who is the collection agency or creditor you cannot reach?
I would be prepared for that past apartment debt to be seen if it were me.
I cannot reach Acceptance Now, it’s company that’s partnered with diff furniture companies to offer financing. I tried calling them but can’t get anyone to help with settling the account. I have disputed the account due to that and the account was established in Oct 2013, last payment was 5/2014. Not sure what else I should do about this, do you have suggestions? I’m also working with a credit repair company called Credit Saint, any suggestions on that? Do they really help with credit repairs or can I do this all on my own? I really want to try and get approved this year hopefully soon.
Thank you for taking the time out to respond to my questions.
I generally see credit repair companies that send canned letters as unnecessary. It is something most of us can do on our own, and using dispute letters available from the CFPB: https://www.consumerfinance.gov/blog/debtcollection/
Is there anyone else showing on your credit reports for this account, like a debt buyer?
Hello Mr. Bovee,
I am in my 30’s and I want to start investing in fixer uppers. My credit scores are around 730. All my bills are paid on time but I have one old debt (2015) from an apartment I’ve tried to dispute. The debt is for $2,397. Do you think this debt would prevent me from getting a loan?
It is likely that it would, while it is unpaid, but if you settle it, and it is updated to show as a zero balance paid collection, you can likely reach those goals.
Hi Michael me and my fiancé are going to be applying for a FHA mortgage. we are supposed to close on April 30, 2020 . My credit not the best on my Experian my scores are 578 571,566 but on credit karma my scores are very low my TransUnion is 549 and as of today my Equifax just went down 15 points from me disputing an old store credit card children place that was open in 2015 I haven’t used it since in the period of time I lost the card I thought I reported it but during that time my late husband died and I was going through a lot. Anyway I see late charges and there was a balance of 306 but it’s closed now. I also just payed up a debt that was affecting both are credit on December 2018 cryo cells when are son was born but then my fiancé got sick couldn’t work was pending on social security disability we only had my survival benefits for me and my daughter from my late husband We just payed $600 and tomorrow we are going to pay the whole balance 1,776 they Even said they would fax my mortgage broker stating we are all payed up because they put a negative on both are credit scores. My biggest worry is my student loan I’m coming out of default this Wednesday they said they can also fax my mortgage broker that I’m no longer in default and not in the neg did the rehabilitation program. The only problem is it’s going to take 40 days to update to my credit report. My mortgage broker said she can rescore my student loan and the medical bill the cryo cell saying we are all payed up no more neg on are credit with them I still owe 12,000 for my student loan but are no longer in default between both are incomes comes to 6000 a month the house we are in contract is for 316,000. I also been paying my credit down to 30% also just got a credit increase of 500 now I have 999 credit available with only $58 going to pay it down to $30. I still haven’t seen an update on my report capital one said probably tomorrow or the next day it’s should post I’m in good standards with them. I’m hoping with all these payment we just payed off and my student loan out of default I will deff get my credit up before we close god willing so we could get this house that we love. I also wanted to ask you is credit karma not Alway updated or have the right accuracy my broker said there not and they do scoring different then Experian. My fiancé worried even though his scores are great that my poor scores will get us denied plus I get more income so we need to have this joint mortgage to qualify. Ok tnx if you could give me some input if you think we have a chance getting this mortgage.
Btw my fiancé credit from Experian is 797 763 729 all great scores. His scores on credit karma are a lot lower his TransUnion is 646 and Equifax is 524 we are not sure where there hoping to pull are scores from.
It sounds like you are doing everything you can to get this loan to go through. FHA has the most forgiving underwriting in your situation. I cannot add anything else you should do. Starting earlier with the steps you took is the only thing I suggest others do that may read this.
Good luck!
Post an update with how things go.
good evening,
i was wondering how much a 6 year old $7000 repo will affect my chances of getting a usda mortgage, everything else on report is good ( no lates or other dings)? I currently have a 700 score across all 3 agency’s. just curious if I’m wasting my time to apply for usda.
thank you!
If that collection is resolved you should be fine.
If that collection is not resolved, you would be wasting your time until it is, or until another year goes by and it ages off your credit.
Please help old student loan not showing on credit report I have preapproval for FHA loan I have chosen a house Payed for appraisal,inspection and $1000 earnest money I allowed the loan officer to know that I have an old student loans he said nothing about it was show back up is this going to show up waiting on them to approve the FH a loan now please help
It is possible that an unpaid federal student loan could still be found and stop this loan from going through.
I would like to apply for mortgage;
FICO scores:
768 Experian FICO SCORE 2
754 Equifax FICO SCORE 5
684 Transunion FICO SCORE 4
My concern is that on the Transunion report ONLY, there is a collections for a timeshare ($7000) from 2015. Does it matter that it is only reported on one credit bureau; my understanding is that lenders look at middle score…I would also need to get that middle score to 760 to get the best rates…I am a few months out from actually applying for loan as I only have $3000 saved to date.
Would I be considered for a mortgage conventional or FHA with the collection on one report?
FHA typically wants any collection resolved over 2k. \
They will all see it and question it.
You may want to try to resolve it before hand.
I am hoping to use a VA Home Loan purchase a home around April or May of 2021. However, I have 2 open collections on my account. Current credit score is 587, and I’m certain it will be back to above 620 by my hoped for purchase date. Will those 2 collections hold me back from purchasing?
If the collections are unpaid, I would tackle them before applying. If they are paid collections, you are good to go when your credit score improves.
Do collections Matter when they are added to your credit report as long as they are completely paid off before applying for the mortgage?
Talk to your loan officer.
I see many mortgage loans go through with paid, or resolved collection accounts on the credit report.
The father of my kids and I are planning on trying to buy a home in the beginning of next year. My fico score is pretty low, 543. Transunion and Equifax around the same 545. My boyfriends is 605. We are going to pay off collections in the beginning of next year when taxes go out, because we just don’t have the extra cash right now. We have paid rent late 2 times this year, and our utility bill is up to date. We have assets for down payment and closing costs. We also have a family member willing to be a co-signer. We have both worked for the same company. He’s worked there for 9 years, I’ve been there for 5 years. We make about 6,000 monthly together after taxes. Do you think we would be approved for an FHA loan? Will the co-signer be a big help in getting approved?
I also wanted to add we will be applying together. Does credit age matter? His credit goes back 6 years and a few months. I have a car payment I’ve been paying on, for 4 months now, by the time we go to apply I will have at least 8 months paying on the car. We both have 100% on time payments with what’s linked to our credit.
The FHA loan will be the route to go if your scores are not 640, and perhaps even if they are.
I would take care of any unpaid collections as you are able. That will help you get approved, and could help your scores quickly enough, but the co-signer will help if your scores do not improve enough.
Happy house shopping!
Thanks for your feedback! You gave us more hope!
Hello,
I am wanting to purchase a home. I make very good living but my credit took a hot due to late payments last year while caring for a sick parent. She has since passed on and I have worked hard to recover. FICO 8 is mid 600’s but 5,4,2 are mid 500’s to low 600’s I also have 3 chargoffs (two paid by me] 1 outstanding I refuse to pay and is being worked on by Lexington law. With all that going on could I still qualify for a hone loan?
Thanks
I do not think so Gene.
What is the deal with the one you refuse to settle?
I have one collections from 2015. Portfolio recovery associates bought it. I have been paying 50.00 a month. on time. my balance is 1935. my FICO is 680. spoke with loan officer at Caliber Home Loans. This is the only one negative on my credit. IM told i cannot get a FHA loan unless i pay it off. He first told me if its under 2000,00 i would be ok so long as i was paying it on tiime. I recently recieved a call teling me i cant get the loan unless i pay it off. He had me do a conference call with Corelogic Credco and Portfolio Recover Assoc. PRA told them i was a month ahead in payments and i have been paying on time. Why cant I get a FHA loan? My debt total debt is aprrox 3400.00
Can you come up with money to pay this off?
I tried settling and they refused . Since this post my credit score has gone up 57 points. I am at 742..
I met with a realtor yesterday and told him my fico was 642 and he told me to get pre approved for a mortgage. I’ve been working with a credit repair company and she’s got many things deleted off my credit. Except one apartment bill of 7k. Will I be able to qualify? Or should I just let my husband get it on his own?
I doubt you will get approved with an unpaid collection like that.
Also be careful and look for any other unpaid collections that are less than 7 years old to pop back on your reports. That can happen sometimes with credit repair companies.
I want to buy a house. I have paid all of my credit cards down to 10-20% utilization. My total credit card debt is less than $1000. I have 10 collections that total about 3500, majority are medical. My FICO is 616 ,my credit score is 591, and I’m sure they will go up as soon as my credit report reflects the credit cards I recently paid down. I have$ 4000 saved .Do I have to pay the collections off before I start trying to get pre-approved ? I don’t want to hurt my credit score by getting a hard inquiry when trying to get pre-approved if I need to tackle the collection debt first? Also what is my first step in trying to buy a house?
FHA often has a hard stop on loan approval if your unpaid collections exceed 2k. You will want to address these first. I would try to settle for less wherever you can, though it can be tougher on medical bills.
I would talk with a loan officer about hoe to prepare for applying for the loan, but not let them do the hard pull yet.
I had several Collections on my Credit reports due to the failing economy, and the eventual loss of my employment after 23 years in 2009. In order to keep my home and my car, I chose not to pay on credit cards. Several of those credit cards were charged off eventually bought by debt collectors.
The statue of limitations has passed on all of these credit cards. Most of the credit cards and or collections have fallen off of my credit report as of January 2017, except 2. Two accounts are owned by the same debt collector. The accounts are no longer in the collection side of my credit karma report, but now they’re repairing under loans. What is this? How is this? The statue of limitation has clearly passed, and in another 4 months they should fall off my credit report all together, however, this debt collector seems to have reaged these two accounts. Is that possible? I have never made a payment to this collection agency, I have never had communication with a collection agency. I have ignored the many attempts at settlement offers, simply because I was not in a position to pay anything on them and as time went by thr closer to the statue of limitations came.
So, my question is. Can this collection agency reage the 2 accounts? Or does it still go by the original delinquency date of the original creditor?
It should go by the original delinquency. That does not stop errors from happening, whether by accident or design.
If it were me I would wait the 4 months, and if they don’t drop off, I would send credit bureau disputes to get them removed.
I am currently in the mortgage process. I applied for a fha loan. I had to pay a debt that I had that was non medical I settled the debt for $2000. My middle score is at 627. The collection is 5 years old will this make my credit score go down? I paid on it last month. If it will make my score go down how long will it take to update on my credit report?
Hard to guess at what your credit score is going to do, but you can get an FHA loan through with a 580 credit score. Most major banks that do FHA loans want to see a 620.
Ask your loan officer if they can do a rapid rescore for credit report update speed. Otherwise I see credit reports update within 4 to 6 weeks after you resolve old collections.
I want to apply for a VA loan of FHA loan (first time home buyer) and I have no idea if it is even possible for me to qualify. I am a single mom and relocated to more affordable area a couple years back to pay down debt and give my kids a better life, but I feel this stupid credit score is holding me back.
I am extremely discouraged at this point and wanted to know if it is even worth the effort to proceed at this time with a home loan. My goal is to buy a home around the end of this summer. My current FICO is 586, with the last 2 years of payments on all accounts on time. I do have some relatively old medical debt in collections that is not only being charged interest almost weekly, but is also being reported inaccurately (I had medical insurance and it was not billed properly so I refuse to pay this amount). One is reported opened in May 2013, with a current balance of $2,738 (original $2,000) and another reported June 2011 from the same company with a balance of $78 (original $50), Another from the same stinking company reported May 2011 for $1,200.
I have tried repeatedly to get them correctly reported and / or removed through the collection agencies and credit bureaus, all to no avail. They are the ONLY collections accounts I have on file, but my FICO is currently only 586 because of them (I think). I do not know what to do in regards to raising my score.. All of my other accounts have been on time for at least the past 2-3 years. Do I have a shot of qualifying for a loan with this on my report? All other accounts are in good standing and DTI ratio is 29% including all monthly minimum payments.
P.S. I have read that medical debt is no longer being counted in home loan qualifications as of 2016 but I wanted to find out how that affects my chances in relation to my low FICO score.
Technically, FHA loans can go through with a 580, but 60 is the norm.
I would connect with a bank or local broker that does FHA/VA and get started working with them to put yourself in the best position by summer.
If those credit bureau entries are truly incorrect in some way that is not being fixed I would consider filing a credit reporting complaint with the CFPB too.
I am wanting to try for an FHA loan, but I want to make sure my credit is where it needs to be before I do. My lowest score is 530, and my highest is 583. I have many doctor bills, and one unpaid fingerhut account. I am paying off the fingerhut account, but I do not know what to pay off on the doctor bills to raise my credit. I know I really need to be around 640 to get the loan easier than a lower score. What should I pay off on my credit to raise my score? And what will the lenders look for when I apply for the loan?
How old are the debts?
Do you have any positive items showing on your credit reports?
How many different medical debts are showing on your credit? What are the balances?
The fingerhut is a little over two years old, the medical bills range from one to 3 years old. I have a car loan in good standing, and two credit accounts in good standing with zero balance. I believe my total medical debt is around 10,000 which I need to pay down, I just dont know where to start.
I would start with the smallest medical debt and work my way up. I would be looking to settle them for less where ever possible. Check out this post about settling medical debts, and be sure to watch the video in that article.
Hi, my husband has a collection account from HSBC loan taken out in 2009 that was sold multiple times it is now$11,000. He has a median score of 660. Everything else is good. Is there any way we can approve for a home loan?
You will want to resolve the unpaid credit card by settling it for less and updating to the credit report as paid. That, or let it age off after 7 years from when you stopped paying. When did he stop paying HSBC?
Hi Michael,
I am in the process of trying to purchase a home. I went through a divorce in 2013 and I had 3 credit cards that fell behind. Chase was at $25,000, BOA was at $22,000 and Citicard was at $29,000. Needless to say, my credit score was hit really after this happened.
I finally got the Chase card payed off this past September. The other 2 cards that were charged off in 2013 and I am still trying to pay them off. BOA and Citicard are both showing up as charged off on my credit report.
My BOA card currently has a balance of $13,000 and I have a payment plan set up with them. My Citicard balance is at $9,300. It was sent to a CA in 2013 and I had a payment plan set up with them until Citicard pulled my account back last month. I am still in the process of trying to negotiate something with Citicard. They offered me 3 options:
1- Pay off the account in full and they would update my credit report to say, “paid in full.”
2- Settle for $3,100 and they would update my credit report to say “settled in full.”
3- Pay $310 a month for 30 months and they would update my credit report to say “settled in full.”
My mortgage broker said in order to qualify for an FHA loan, I need to provide proof of a payment arrangement for BOA and Citicard. The person I spoke to from the Citicard Recovery Department said they will NOT provide me with written documentation for payment plan. They will only provide something in writing for the settlement. I have a letter BOA stating I have a payment arrangement set up with them. I don’t think my DTI ratio would be approved if I included the 5% of the Citicard balance, instead of a written payment agreement.
I have $3,100 cash, so I could do the settlement offer. My question to you is, if I do the settlement and they update my credit report, will that make my credit score drop? I have been working hard trying to clean up my credit report and raise my credit score. Right now my FICO score is around 650. I have worked so hard to get the Citicard balance down $9,300. I am afraid if I do the settlement offer my credit score will drop once they update my credit report and I may not have a high enough score to qualify for the 3.5 % down on the FHA loan.
Thank you so much for your advice!
You may only need a 620 credit score to get your loan approved. But settling should not drop your credit score by that much.
And if the whole loan is a no go without the Citibank resolved, you already have your answer… settling gets you where you want to go.
Please do post an update with how this all shakes out. Later readers will benefit from knowing how you progressed 🙂
I called back Citicard today to make the payment of $3300 to settle the account and the representative I spoke said he can’t find anything in the notes about a settlement agreement, so now the settlement offer is no longer an option.
He said the only 2 options I have right now is to agree to the payment plan of $300 for 30 months or pay the balance in full. I spent an hour on the phone with this guy. I even asked to speak to a supervisor, but no luck. I asked him if I could get something in writing about the payment plan and he said No. He said they would do a 3 way call and verbally tell someone I am on a payment plan with them, but nothing in writing.
Do you think verbal acknowledgement of the agreement over the phone and bank statements showing the payments coming out of my checking account would suffice for an FHA loan?
UPDATE: After giving it some thought, I decided to call Citicard back and this time I asked to speak to a supervisor. I told the Supervisor I had a taped conversation from last Thursday about a settlement offer that was made to me, but when I called in earlier today to make the payment, I was told there was not a settlement offer noted on my account. Needless to say, within 10 minutes of our conversation, the Supervisor had offered me another settlement. The new settlement is for $3,250 ($50 less than the one from last week). They are giving me the option to pay it off at once or make payments of $200 until the $3,250 is paid off.
They are sending me a written agreement with all the details of the settlement in the mail, so I should receive it sometime next week.
That made my day!
Way to go Lori! Please update this thread when you know the outcome of your loan.
Will do, thank you!
I am interested in purchasing a home. My credit score recently dropped to 540 due to my student loans going into default. They are now current. I have a car loan with a balance of $3000 and 1 secured credit card. I have 6 collection accounts totaling $2300. I have $5000 in savings. Do I have a chance of getting approved for an FHA loan? Also, should I work with an agency to have these negative items removed from my credit report and will be be better for my report if I paid them off?
Typo: Will it be better if I paid them off, or try to get them removed?
It is better, and more of a sure thing outcome, if you just negotiate a lower lump sum pay off on the unresolved collections. You can get an FHA loan with a 580 credit score and no unresolved collections.
I highly recommend you work with an experienced FHA lender or broker. They can help you get your credit straight and let you know what FHA needs to see.
Thank you so much for the response. I think this is very good advice!
I am interested in purchasing a home soon. I have had a vile tart repossession and currently have 2 accounts in collections. I am planning on laying those off in the next month or two. My credit score is currently at 584. What are my odds of being FHA approved
*Voluntary repossession was 2 years ago the remainder of the account is in collections
FHA loans can get approved with a 580, but the norm is a 620 or higher. I would work with a loan officer or broker with a lot of FHA experience, and still try to get the score up. Sometimes resolving unpaid debts is all it will take, and other times you need 90 days to 6 months after settling old bills.
I have finally paid off all my collections (6), did that all in one year. I now have 2 old debts not in collections gonna pay off in January..only other loans i have is a vehicle loan (6 more payments) and a personal loan…going to apply for a mortgage in March/April…scores are 640s , were lower 540s in January, wish me luck.
Nice! Good luck and post an update with your progress.
Thank you, I def will, going to see about a FHA loan, lower down payment and credit standards.
I recently received a default judgment from the courts for a car loan I co-signed for almost 8 years ago. The original debt does not show up on my credit report. Will this show up when I apply for a mortgage. Fico score is 662. All of my accounts are current and show pays as agreed. What should I do?
The mortgage underwriter is near certain to find any judgment even though it does not show on your credit reports.
If you are going for a mortgage, I would settle the judgment before I try to apply. If you are going for FHA financing, but cannot afford to settle the judgment for a lump sum, you will want to try to negotiate a monthly payment you can afford, and have made several payments on time, before applying.
Mike I have a judgment from Westlake financial from 2014. Westlake has reported its charged off and it shows the account in judgment on my credit report. I’m up for a pre approval but this judgment is my way to be successful. Being that the account is in judgment status can Westlake still report the account is delinquent being that legal parties are involved and its judgment status? I dropped 60 points due to a recent report from Westlake about the account. I’ve contacted the proper party to resolve this judgment but My score is taking the impact of the account.
Yes, judgment debts do get to show on your credit, and can hurt your FICO to a varying degree. You can still get a loan approved with a resolved judgment, just not an unpaid one.
If you are asking whether the original credit reporting can still show up now that there is a judgment, that is also normal. I like to call it double jeopardy. It can get as bad as triple trouble!
But again, resolving the debt will help you reach your goals.
Hi Michael,
I’m in the process of buying a new home build. I prequalified in July 2014 and the builder began to build the home. I pulled my credit in early November and noticed a collection account from Convergent for $890. The lender then pulled the day before I did, and saw that my credit score had dropped more than 60 points. I was told by a realtor to dispute the account becasue it was under $1000 and should not affect getting the approval from FHA. I’m not for sure if this is the best option. I have little time left, as closing is coming up soon, What should I do, the collection agency will not negotiate to remove the tradeline once it’s paid.
Do you recognize the account as your own? When did if become a collection account (when you missed payments)?
According to the report, it’s a Sprint bill fron 2012. I recently checked my credit and they removed it fron Experian and Equifax but not trans union?
If it is your account, and Convergent is confident of its information accuracy, they may not remove it. You can often negotiate a settlement, which would update to a paid collection, and find that FHA will still approve with a 620 FICO.
If you were to dispute it, what would be the basis?
My husband and i have put a contract in for a home loan. The loan officer sent it to audit and said it passed with flying colors. My score is 621 and husbands middle score is 655. I have a collections on my credit report from 2013 when i was overpaid for veterans widows benefits. I was set up to pay monthly payments but my mother has been sick forcthe last 2 years and passed away August 2016. We had been taking care of her and she lived with us. Do we have a chance on getting the loan? Our debts tgru crefit cards combined are about !7600. Plus the $4100 owed to veterans.
Also i have not made any payments to veterans for over 2 yrs. But i get social security and they take out money each year fir the va collection. The IRS treasury gets the money.
The money the IRS intercepts from your tax refund is not typically the payment plan you need to clear mortgage underwriting.
You will likely find you need to pay the VA back, or have payments set up with several months of good standing before the loan is approved.
Are those credit cards all current?
Hi there,
I have 4 accounts in collections equaling to about 9000$. One was a personal loan, the others are credit cards. They just were sold to collections this month. I also have 400 in collections of medical debt.
I don’t make enough money to pay them, and my significant other lost his job and can’t find any steady employment so I don’t know what to do. We’re living off one income.
I eventually want to buy a house. But my credit is low. At 550. I know I can’t get a loan in my current position. I don’t plan to until a years down the road.
I am considering bankruptcy because I don’t make enough to pay my collections accounts after all my other bills, I only make 1400 a month. My car will be paid off in a year and a half. And that’ll free up 300 a month. I am scared to wait that long to pay in case I do get judgements.
What would be a quickest way to build my credit up to prepare me to buy a house in the next 3-5 years?
Thank you
You only need 2 years separation from a chapter 7 to qualify for FHA financing. Without digging deep into your personal financials, I would say chapter 7 would be the least cost, and quickest path to home ownership. The money you save can be used as a down payment 2 or 3 years from now. Be sure to work toward getting your middle credit score to 620 with no unresolved debts before applying.
I have to cable bills that I’m disputing because I know that they are overcharging me will that stop me from getting a home loan FHA I have a disabled son and disabled brother also I have no credit also good or bad know that I’ve been living in the same place for two and a half years
What are the amounts of the bills?
When are you trying to get the home loan?
What is your current FICO score?
What has your loan officer or broker told you to expect given the situation?
Hello I have a collection account on my credit report have an arrangement of monthly payments . I have tried 2 times to settle with them they won’t.so I continue to make the payment my credit scores are 730 and 680 my problem is now my husband wants to get a 2nd home how can I resolve this? Should I just pay the full amount owed and move on?
Who is the creditor or debt collector you are dealing with?
The company is profolio recovery. One year ago gave me an amount called to pay them 2 days later another person gave me a different amount keep saying daily payments change? Can’t get a complete answer from no one.
File a complaint with the CFPB about Portfolio Recovery Associates changing the balance owed with each phone call. They will get the right amount figured out and let you know pretty quick after that.
So I be been approved for a mortgage (rural development program) they pulled my credit said everything looks good. Found a house and offer is accepted. I’ve sent over all the documents (bank statements, pay stubs, tax returns etc). We close on December 15th. Just the other day after they pulled my report, and collection account popped up for $403. Will they pull my report before or on closing? I’m just curious what I should to make sure the loan is not denied.
Check with your loan officer.
Is the debt legitimate? Has it been 7 or more years since you stopped paying? Who is it that suddenly started reporting it?
Hi, How did your situation work out for you? I’m in the same boat as you. Where you able to close on your home?
I have one two late payment on a car loan and had a old car on there have 4 credit cards score don’t go up that much trying for a year now want to buy a house soon what should I do thanks
What are your current credit scores?
Hello Mike,
Im seeking advice with steps needed/chances of getting approved for a house (first time home buyer program).
I have decent credit around 680-740 between all 3 bureaus, never a missed payment or anything. But my wife has 5 unpaid collections opened totaling $7,000(medicals, appartment complex and light bill) credit scores ranging from 540-640.
Since my credit is decent, would i have to pay her collections before applying? If so would a payment plan to the collection agentcy be good enough or would the bank lender require paid in full?
Lasty, i currently have both cars in my name, which is damaging my credit/income ratio, will this hurt me when applying for the loan? Since with the home loan i would beable to then add her income, or do they look at it as an individual stand points and i need to get one of the cars transfered over to her name or another family members name?
I just got my wife a secured card to start repairing her credit, would like to purchase a house around march-april if possible.
Thanks for taking the time out to read this.
If you are both applying for the loan, and it sounds like you should in order to include her income, I would want to settle her unpaid collections, rather than engage in a payment plan (though payment plans are sometimes sufficient with FHA loans).
How old are the collections?
Hello, the dates are as following,
Sep 6, 2011 – from apartments
Jul 13, 2012 – electric
May 8, 2011 – hospital
Jul 24, 2015 – hospital
Apr 6, 2015 – hospital
Thanks. The earliest to age off is in 2018, so I would be negotiating and settling. I would focus on non medical debt first, so that those updates to the credit report season more. Paid medical is not factored into credit scoring like it once was, so resolving those will often have a more immediate impact.
Hi Michael, my husband and i recently had to file bankruptcy. One of the acvounts that went into bankruptcy was a capitol one account that i co-signed on for my son years ago. This went into the bankruptcy by mistake and now shows up on his credit report as a collections. Amount is only $986 and the collections agency won’t let us settle because it was iincluded in the bankruptcy. Question is, now that it is on my son’s credit report is he going to be able to get approved for a mortgage? Help! Thanks.
Was this a situation where your son was an authorized user on your card, or it was his card and yours equally?
It will get in the way of a home loan these days. If is the co-borrower on the account he should be able to resolve the collection account with Capital One. He will want to escalate his issue up the ladder. Let me know if he runs into trouble.
Is he trying for a mortgage right now, or in the next few months?
I am in the middle of obtaining a loan for a home purchase via FHA. Middle score of 597 with a low DTI ratio because of late payments in the past. Since obtaining new employment in May and making payments steadily since, it has been improving. My question is, a new collection just popped up onto my credit report for a Verizon $411. Should I quickly pay this off and obtain proof because I’m sure they pull another credit report for signing date. I do have 3 other small items in collections from before. 2 being medical and 1 being a disputed Time Warner bill that was previously paid with an arrangement before an installation date with them at an old residence but I am having trouble obtaining proof from them through phone calls and stopping in to office. I assume that the collection is more important than paying down a credit card for an improved DTI ration? This is killing me with all the hoops because I wasn’t prepared for this so quickly, but my life’s circumstances became dangerous in my current living arrangements. So it is imperative that I make the best choice for the best possible outcome. Thank you. Advice is appreciated.
I would resolve the collection first if it were me.
So I called and they said they don’t report to credit agencies. I actually just got call that I’ve gotten approved. But don’t want any other reports pulled last minute to possibly hurt me.
Thank you
It is known that you would pay down your revolving open accounts first ( credit card). In fact unless the lender ask you to pay off a collection account you shouldn’t even touch them. It is very possible to get a loan with collections. Each lender has their own standards in conjunction with the FHA guidelines. If your credit score is at 580 and your DTI looks good and you don’t have any federal financial obligations your good. Check around an skilled loan officer would be able to let you know where you stand. Thats the point of the pre approval process. As long as things don’t change from pre approval to close you should be fine.
FHA typically wants unpaid collections in excess of 2k resolved.
I want to start the process in November to buy a home my score is in the high 600’s but i have a 200 medical collection do that have to be paid
You may be able to still get the loan approved with a single collection account that low. If it were me, and the debt is legitimate, I would pay it.
I have a similar situation: Medical bill that just went on my credit for about $230 from a car accident. I believe it is legitimate. My question is if I pay it can I then go and dispute it because I never received a bill from them? Will I have a success? Just about to apply for a home loan and I am worried about how this just dropped my score 60 points from a Fico score of 740. We keep low balances on credit cards, pay on time and have a new car loan we got June 2016.
Also curious if pay-to-remove really works? I have been researching and it seems like it goes both ways. Might be successful if it’s a small collection agency and if you get it in writing? Any insight would be greatly appreciated! Thank you
The pay for delete situations I see succeed tend to be utility bills in collection and small one off medical bills. It is worth a shot, but also know that paid medical collection accounts on your credit reports are no longer given much weight. If you resolve the collection account and do not get them to take it off your credit reports, your loan will likely still succeed.
I’ve been working on my credit for a year now. Starting middle score was 505 FICO. It is now 582. I would like to buy a house next year around summer 2017. I have 1 judgement which i pay monthly on (PRA) and will be paid off in Feb 2017. I have 4 accounts in collections that i need to settle. (3 with PRA and 1 with LVNV funding) Date of last activity is around Sept of 2012 on all accounts. They have been in collections since roughly 2014. Total of collections is $2600. My goal is to get my credit score up to a 620-650 range. I have a secured credit card that i’ve been paying on 6 months now and keep the balance at or below 25%. I just applied for a credit builder loan for $1000 (12 month), first payment is 10/7. And i have student loans that have been current for 16 months. I have a few questions. Should i pay/settle the collection accounts? How long does the negotiations take? Will the collection accounts affect my changes of getting approved for a FHA loan?
You are going to want to resolve the unpaid collection accounts before going for the loan. I would prefer to have that done 6 to 12 months prior to my loan application. You will get the same credit benefit from settling for less as you will paying in full, so I would save money where possible.
Negotiations can happen over one call, or can take many. It will vary. But sometimes you have to grind a debt collector down to get to something you can afford.
You can still get the loan through if you are making payments on the judgment consistently, but I would try to pay that off quicker too.
Last October I decided to give Lexington Law a try. They disputed a medical bill for validation. It is still in “reinvestigation”. I wrote a letter and filled out a dispute form to mail in to Equifax because the collection agency is reporting the same thing twice on my credit report. Same dates, same amount, same original creditor, only differences are one account number has an added 0 and one says “reinvestigation in progress”. I got the results from my mailed in dispute today. The only thing they did was update my name to include my middle initial. They didn’t investigate anything or address my dispute or concerns. What should I do now?
Can you be clearer on what you are disputing and why? Are you only disputing the duplicate entry, and was one removed? Are you disputing the validity of the debt, and if so, why?
Yes I disputed the validity of the debt because I had a few other items that weren’t mine so I wanted to be sure this is mine. I never received notice this was going to collections or in collections. It is a medical debt. The duplicate was not deleted. Equifax rep said I requested my name be updated which I did not. I disputed the duplicate account and since the collection agency didn’t respond, disputed validity with Equifax. She just said “oh I apologize. Lets start a dispute now”. So they are giving another 30 days and I probably still won’t get anywhere. I have copies of my dispute letter and it was sent certified mail return receipt requested.
I would consider filing a credit reporting complaint with the CFPB. I might have done that before the second dispute, but now that you have sent the second one, you may want to wait to see the outcome.
My husband and I have already been pre-approved to buy a home. Although at the time I was given the pre-approval papers signed and everything, the lender states they needed something stating the 2 charge off accounts were taken care of. Does this mean I can create a document myself staying these accounts are paid/satisfied? Like I said we have already received the pre-approval letters, just need to know if you think a document from myself stating these accounts have been taken care of can they not approve us now?
Were those debts judgments or just collection accounts on your credit reports? Did you settle or pay them off, and if so when? Did you get documentation from the creditors or debt collectors?
btw it’s an FHA loan..
You can get an FHA loan through with a 580 credit score, but not all lenders will do them.
My husband was pre-qualified for a loan with a middle score of 646. A collection that was reported on 2 of the 3 credit bureaus is now being reported on all 3 & caused his middle score to drop to 519. Now his low score is his middle score (526). He has since paid the collection & they’re not removing it but going to report it as paid. Do you think we will still be able to close once the lender pulls his credit right before closing?
You usually need a 620 to get an FHA loan through most lenders. When is the estimated closing date?
Sept 30th
You could look for it to update by then, but also be proactive by utilizing your credit reporting dispute options.
Ok, Will disputing the debt affect the loan. I know the lender has the ability to see what disputes have been made & the results.
Talking to the lender first may be a good idea. But if the account is resolved; is not showing the updated status; and you dispute it to show paid, you would not be looking at the same scenario as when we send in disputes on unresolved accounts that end up staying on the report while an extra notation shows it is disputed by consumer. The latter is the type that lenders often want resolved before underwriting approves a loan.
ok.. Thanks
I just found out while trying to buy a condo that my Experian report says I’m dead, because it had someone else’s info, such as a closed account from USAA, Midstar…not sure what that is..But I’m alive and have never been in military or had an account with whoever they are. The other two credit bureaus have none of that info and on one in at 680 the other one at 679. I don’t have 30 days to dispute. I don’t want to lose my chance at a good deal. Any advice would be greatly appreciated.
Hi, i am almost getting ready to close on a new home but theres some issues with unpaid credit cards to proceed. Both of the credit cards collection agencies have gone bankrupt. What is the fastest way to find out how much is owed and who is in charge of the collection debt so i wont loose our on getting the house??
Who are the collection agencies you are dealing with? When did you last make payments on the accounts? Did either account end up in court for collection?
Call in for a consult if you like. I can get to the bottom of the issues and provide quicker feedback. You can reach me at 800-939-8357, ext 2, or fill in the talk to Michael form in the right sidebar.
Hi. Trying to buy a house but an old debt came up for $737. I immediately paid it but now waiting for an update from Transunion. They wouldn’t send a receipt. How long should I wait to call lender? Paid on July 12, 2016. Thanks.
Who is it that you paid? Did you have a payoff letter, or anything like that?
Hi. I paid and and no, no payout letter. Just got on the phone and paid it directly with my checking account to collection agency. Still today, lender called and said it does not show as paid with transunion although funds were taken out of my account. Called transunion and they said they could not give a receipt. Called Amazon and they said they could not give me any information as it was in collections. Don’t know what to do. Someone should have to provide a receipt or am I wrong? Thanks.
As shocking as this sounds, in most situations there is no requirement to provide a receipt in the way you are thinking. You would need to request that prior to payment, or be in a situation where they have to send one, or are known to.
I would file a dispute with the credit report agencies. Read through this guide about credit report disputes.
If your loan officer or mortgage broker is experienced, see if they can do a rapid rescore.
Thanks so much for your help. I may have to file a dispute. Do you know roughly how long it will take? Time is precious…
Read through that linked article. Results can occur within a matter of days up to 30.
Thanks. I’ll just wait. Can’t wait another 30 days. My 30 days are up on 8/12
That does not make sense to me. I would be as proactive as I could. You can indeed have a direct impact on how quickly they respond to this. Filing your dispute with a credit bureau along with proof you paid can get wrapped up in a day or 3. And your loan officer can have a direct impact through rapid rescore.
Waiting would not be an option for me if I wanted this.
I have disputed it. I will keep you updated. Thanks for your help.
Hello Michael,
I have five collections accounts on my report, and a reported 7 late payments. One of those collections accounts are paid in full, and that covers a few of the late payments also. They won’t remove it for about another five years. I have no judgements. I have student loans of 48,000.00 that just went into repayment this month. I have two credit cards that I have been making monthly payments on. My score is about 580 right now. I plan on applying for a mortgage around December or January. I also have an account in he checked systems that I am making monthly payments on. That will be paid off in December. By then I will be making about 2,000 a month before taxes. I should also have a couple grand in a savings account for the closing costs. What chances do you think I have to get approved?
Post an outline of all of the collection accounts, and whether there are still balances owed, and when you last paid anything on them.
My husband and I just got a preapproval for a FHA loan but it hasn’t went to underwriting yet. We have in dispute notations on our credit report. Will these notations keep stop us from closing on our home?
Who are the disputes about? Who are the banks or collection agencies you disputed with?
Disputed items can hold up a home loan.
Hi Micheal. My husband and myself were preapproved for fha loan. We had some dispute remarks on our credit report and the collection agency, phoenix recovery group, offered a settlement. I have in writing their agreement to list the account as settlement paid in full and remove all dispute remarks once payment clears. My question is will doing this settlement cause our score to drop? The settlement is for an old apartment broken lease. Thanks
If it is removed it can no longer factor into your score, so it won’t matter.
If it stays on there, but shows resolved, your FHA loan can still go through. You can still get an FHA loan with a 620. You can actually have a lower score than that in some situations.
My girlfriend has built up a credit card debt as high as $19,875.00 over 10 years.. She is now on disability to the tune of about $750.00/month. She cannot afford to pay the bills and live! Can she consolidate or should she file for Chapter 7? She is 60 and no longer works.
What would you suggest is her best course of action?
Thanks!
By the way Michael, her credit score is 610.
Thanks again!
You posted this comment on a page that focuses on getting a mortgage with bad credit. Is there more to her story than just the un-affordable debts that need to be resolved? Is she concerned about a mortgage in the next 2 to 3 years?
If there is no financing goal I would generally suggest someone on a fixed income like this look at filing chapter 7 bankruptcy. From a cost perspective you are saving thousands in chapter 7, and time to put this all behind her is on the order of 90 days compared to what can be a couple years if settling debts using only what she saves up from disability.
Hi Michael,
I’ve been trying to work on my credit since 2013, my Credit score was pretty bad. Today I don’t have any unpaid collections on my report and my Fico score is 643. Last month I was hit with a judgement. I called the court in my county and I was told that I need to get in contact with the lawyer representing the collection agency. Do you think I can settle the debt for less? I would like to by a house next year and now I feel like it will be impossible since I don’t have $3, 500 to pay them. I haven’t call the lawyer yet 🙁
Who it the creditor that sued? What is the name of the law firm that sued you?
the collection agency is Retail Recovery Services of NJ Inc, and the firm is Raymond Meisenbacher & sons, the court told me not to get in contact with the collection agency, I should call the lawyer. I don’t know what to do
I have a page up about negotiating and settling judgments. 50% is an optimistic, yet realistic target for settling many judgment debts. There are instances where you will end up paying more.
You do want to connect with the attorney if they are still involved in the file. That is show you typically have to negotiate with.
I am in the middle of buying a house and am suppose to close in two weeks, a bogus (not mine) account appeared in default from Verizon wireless on my credit report! What do I do! There is also a new line of credit on my report that someone must have opened in my name! Is this going to hurt me going further? I have already initiated a dispute with credit bureaus. What do you suggest?
It sounds like you may have a mixed file issue with 2 accounts that are not yours popping up on your credit.
I would dispute both accounts as not yours. Here is a short guide to disputing credit report entries.
Let me know what happens and lets go from there.
I went through a divorce in the past and then remarried, but during the divorce process and raising kids without that extra income, some credit cards that I had with my previous husband fell short. There are several items I have not settled on my credit report. I would like to buy a new house with my husband, but I’m fearful of these past collections etc. We have rented for four years and haven’t missed a payment and have been employed at the same job for several years. Any input would be appreciated.
Who did you owe those original credit cards to, and what are the balances showing as owed now?
Do you recall when you last made regular payments on them?
Hello,
I am in the process of closing(June 28th) on an FHA home loan.
At the start I had no collection and scores of trans: 725, Exp: 700 and Equifax: 712
Today I got an alert that 3 medical collections have been added to my equifax report as of yesterday for $32,$60 & $188
They are erroneous charges but if I dispute it with equifax at this stage can’t that jeopardize my closing date and earnest money?
Thank you for your time.
Small medical collections like this are handled differently than in years past. The may be overlooked in the underwriting process. Ask your loan officer or mortgage broker what they think of the situation. If they have been around a while, and done many loans, they will have seen this frequently enough.
If the collections popping up do not impede your loan from closing you will have time to deal with the erroneous credit reporting. If not… who are the collection agencies involved? Why are the charges bogus? Let me know and lets go from there.
Hello, My husband and I had some hardships about 2..5 years ago that’s currently effecting our credit scores. We would like to purchase a home a year from now. My credit (640) his (540). I’ve paid off 3 credit cards that were passed due and settled 1 last June that was in collections. I only have one AMEX left in collections for $5842. Should I pay it in full or settle how will a settlement effect my score, and getting us approved for a loan? My husband has a old electric bill $185 (we just discovered recently) & 1 credit card $700 in collections(we plan to pay these two in full within 4 weeks) $8000 behind in payments on a work truck he uses for his small business( we have been making payments towards, predicting to be caught up in 6-8 months-full balance $16000). What advice can you give us on getting our scores up quickly with in the next year? Thank you for your time and service.
How long has it been since you last paid on that Amex account?
Who is the finance company on the truck? Have you looked at any options to put the arrears on the back of the loan so you are not considered later while you are trying to bring the loan current?
I and my husband want to apply the fha loan this year. Our yearly salary is around 100,000. My husband has a good credit history n scores n he earns much money than me. However, I had few collections n judgement few years ago . I settled down all those balance already but may be still on my credit report . Now , I have zero balance on the collection . In this case , can we still apply for the fha loan ?
If the collections are resolved, and with your husbands credit history, you should be in good shape. Let me know if the loan officer or mortgage broker raises any red flags about those resolve collection accounts and lets go from there.
Thanks for your advise . However, is it still a problem that my credit scores only has around 600 because of my collections few years ago ?
It would be better if you had a 620 FICO score for an FHA loan, but you can get approved with a 580 in certain circumstances. What are your husbands credit scores?
My husband credit is good around 750. I m worried about my past collections even I fully paid them few years ago .
I like your chances 🙂
Three collections in account, planning to buy a home withing the next year. Is it better to pay a collections full amount or is it ok to do a settled amount. As I have heard paying it down lowers your score at first.
With old collections you do not get any bump from paying in full. Settling for less and getting the credit report to show a zero balance gets the same thing as sending them all the money.
There are people who see a slight and temporary credit score decrease when resolving collections. But there are others who see their scores leap when they do this. You should be fine because you are doing this a year ahead of time.
Who are the collectors and balances you are dealing with?
There are 3 account that total to 1,377 one from fingerhut account and 2 other for old credit cards
Small balance accounts do not often settle for as good a savings, but you should get some traction.
I want to buy a house within the next year or so and my credit shows that my credit card and Student loans for the past 6 years have been current and on time as well as my car payment payments(last 3yrs), like everyone else here,I’ve had a judgement placed against me Dec 2012 For a Credit card from First Financial bank my last payment to them was in may 2010 the amount owed was $3000. The judgement now is $8000 and the lawyers aren’t willing to work me on a lower lump sum.
My credit score is 689 due to the unsatisfied judgement. I have been at my current job for 3 years and my Dti is 41%.Would i be able to take out a debt consolidation to pay off the judgement and later be able to buy a home?
I have one credit cards Will be able to get any type of home loan?
Who is the named plaintiff on the lawsuit and who is the collection firm you are dealing with today?
What state are you in?
Hi the plaintiff is 1st Financial Bank, USA the lawsuit is for Mississippi but i live in Arkansas
An optimistic result will be 50% of today’s balance. You have a hill to climb sometimes with smaller regional bank negotiations, but it can be done. If you are prepared to pay more than half you are in even better shape. And given your goal being a year out you can slow play the negotiations if need be.
Mississippi allows contract interest on judgment debts. The debt can grow dramatically, as it has in your situation. The sooner you take care of it the better.
You should be in good shape to get an FHA loan if you take card of the judgment and can meet the other loan requirements.
Hello Michael,
I am a single mom of one with an income of about 40k.
I have a 571 credit score and three major items of judgements and liens all satisfied on my credit report, and I have hired Lexington law to try And remove those off of my credit history totally. I just found out about those items and immediately disputed them. After getting the results of “resolved /satisfied” I submitted the paperwork to Lexington law and the credit bureaus. I also have a three items in collection totalling less than 700 dollars. Lexington law is looking to help me get a debt consolidation loan to pay those off.
I am looking to purchase a home within the year.
My questions are… Do you think my time frame is realistic? Is there more I could be doing to fix my credit? Do you think I would qualify for an FHA loan?
Thank you for answering my questions.
You do not need Lexington Law to help repair your credit. You have already done some of the heavy lifting, and have realistic timelines set for your goals too.
Check out my video on this topic: https://www.youtube.com/watch?v=hZaYoeWZXSU
The judgments being updated in the court record to show as satisfied put you well on your way to realizing your goals. You may be able to pay the remaining debt collectors half (or less) of what you owe by negotiating a settlement with them. Be sure to get all of the agreements to settle in writing before you pay.
Lexington will charge you $100 a month for as long as they can, and with no guarantee they will get what you need deleted. They may fail and leave consumer dispute language on your credit report that can cause home loan approval problems later.
If you settled the $700 worth of collection accounts for $300, you will get those items updated to show zero balance and resolved. That is a known outcome compared to a Lexington Law maybe, and for what will likely cost less. Your time line for applying for a home loan gives you a year for your credit to improve, and using FHA underwriting standards, I like how all of this will look for you in a years time.
Here is more about improving your credit to get approved for a home loan.
Thank you so much,
I didn’t pay them yet and I think today is the deadline for my decision. I thought it was a good idea for them to help after reading the reviews. I know about their monthly cost and thought it was worth it, before getting your expert advice. I don’t have much of any other credit on my credit history except for student loans (now in good standing for several months) and medical bills. Should I try and get those medical bills paid before applying for a home loan? It was my understanding that they did not harm my credit as much as other collection items. Am I completely wrong about that?
When it comes to getting approved for a home loan it is best to have resolved all collections on your credit reports. Medical bills are looked at differently than other items on your credit reports, but set yourself up for success.
My husband had a loan ($3400) that was sent to collections in 2014. We had no jobs and struggling to meet rent. In 2016, we are doing much better and have paid off a large portion of our debt. With the exception of this collection, we will be debt free by 11/2016. My question is, will coming to a payment agreement hurt our chances (credit score) of getting a house? We want to buy in 9/2017. Middle credit scores are 740 (me) and 685 (husband)
thanks!
It is likely this unpaid collection balance will prevent a home loan being approved. With that in mind, it just is what it is when it comes to any impact on the credit scores. If you do not negotiate a lump sum pay off, or engage in payments that your mortgage lender will approve of, you likely cannot accomplish the goal.
I prefer settling for as much a savings as can be negotiated in these circumstances. If your scores did dip from the newly paid collection, it would only be by a little, and only temporary.
Who is the lender and any debt collector involved now?
I had no idea you responded! lol I thought I would get an email saying a response is waiting for you. 😉
The lender was Springleaf Financial and it was sent to collections in 2014 but on the credit report, it says it was in 2015 when the collector (Calvary?) received it.
we have not gotten any phone calls or letters from the debt collector.
At this point, could i ask for a pay for delete and would I ask Springleaf or Calvary?
Thanks!
You will not be able to get Spring Leaf to delete the unpaid loan/charge off, but they should be reporting a zero balance as they sold the legal right to collect to Cavalry. You can call Cavalry to negotiate the settlement you need. They may refer you to a different collection agency they may have the account with at this time, and that is normal.
Cavalry is typically not going to accept a pay for delete. You can expect them to update the credit reports to show the debt is resolved and a zero balance owed. That is all you really need.
Hello,
My father and I plan on applying for an FHA loan soon. My Dad’s credit score is 800 and my current credit score is 598. I had two unpaind collections on my account that I just paid off. I also was using a lot of my available credit on my cards. Which we are paying down . I also have two late payments on two students loans from a year ago and they are current. I also had a late payment on one of my cards in feb 2016. I am trying to get deleted. We are hoping to apply by June 2015 or July 2015. For my DTI it is 19% currently. Do you think I will be okay? What is all the criteria for the FHA laon?
Thank you
You can get an FHA loan with a 580 and some good reasons for why your credit is in the tank. Those are the exception though. You typically want to have a 620 or higher with no unresolved collection debts on your credit reports.
Do not miss any more payments anywhere.
Your fathers credit may carry you through. Have you connected with an FHA lender to go over what you will need to get approved based on what he/she sees today?
We have paid off all collection accounts waiting for them to post closed on my credit report. I have also paid my credit cards down to 49% revolving credit. With my credit score of 598 I had been using 98% of my credit cards. We are trying to get them down under 30% prior to applying.
We have not met with a lender yet. We were trying to get my credit score to the 620-640 range.
What do you think? Are we on a good track?
I think you are right on track! Check your credit reports and pay for your actual FICO score in another month and let me know how much it went up by.
Hello Again,
So since we paid my collections off and paid our debt down to 56%. My credit scores are transunion 667 and equifax 654 and experian 608. We have paid our debt down to 39% trying to get it below 30%. Is there any other recommendations? We noticed on experian I had a collections. Which I will be paying off on Monday. Are we ready to apply or wait?
If you have the necessary debt to income and ability to pay, and it appears you do, or are really close, I would negotiate the settlement with any remaining collector and them talk to your loan officer or broker and get going.
It would be way cool if you posted updates along the way 🙂
We live in California. My husband is not going to be on the loan with me, but they are making him do a credit report because his credit is considered mine. My husband has a collection on a student loan that says charged off/collection and status closed on one creditor and on another it says open. The lender is saying I have to settle this prior to applying for the pre approval through them. But, with FHA guidelines it is saying they can’t use the spouse negative credit report to hold me back from a loan, is this correct? So bummed hearing this today. We are trying to buy through a brand new community.
Who is the broker or bank you are working the loan through?
How much is the student loan for? Is the loan federal or private?
The preferred leander is freedom mortgage. The student loan is 27000 it says on the credit report chargeoff/collection then is has a balance of 8000. This is with my spouse who will not be on the loan. The loan is through Navient. After googling it says it was split off from sallie mae which is federal? I am not quite sure which one it is.
They recommended running our credit to see where everyone stands. Between the four of us Myself (husband and Dad (Mom) we make 225,000. To see what it says on the credit report.
I called navy federal and they said they wont consider it, but it may go to underwriting. But, it shouldn’t be a problem.
I don’t know what to do. What do you think? Will this hold us back from our dream home?
Are you saying Navy Federal will not consider the same thing the other lender is holding things up for? In other words, Navy Federal Credit Union is going to overlook that one issue and likely find the loan if everything else is approved?
When I called Navy Federal. The Loan advisor said it should not be a problem. It may need to go to the UW. But, should not be concerning. In your professional opinion, what do you think? The loan opened in 2004. And it says I think sent for collections/Charge Off in Sept 2012. Everyone says not worry about it because the income is so much. I just don’t want to run my credit a billion times. I just got my score up.
All home loans go through a form of underwriting, but if you were specific about the issue I think you have a better shot than with the lender you are trying to go through now.
Is his a federal student loan, or a private loan? Do you know when he last made a payment on the loan?
We think it is a private student loan. Because they usually wont settle the debt from what we researched. And they definitely won’t usually settle for less than half. It is also joint with my father in law he had to co sign. Date of last payment was Sept 2009 from what the credit report says.
Okay. If you do want/need to settle it let me know.
We applied for a pre qualification today. They pulled my fico score and it is 580! I was shocked to hear this. As my credit scores are 676 675 684 :(. Will I still be to qualify for the loan?
Give me a call for a consult Samantha. I want to dig into some details and see if I can help you understand what is happening, and your ability to accomplish your goals. You can reach me through the hot line number 800-939-8357, option 2 rings me.
Hello,
My husband and I have a very large student loan that went to collections and we ended up with a judgement against us. We have been paying on this monthly for a year, but we will not be able to pay it off anytime soon (it’s like $40,000…an unsecured student loan we took out 10 years ago not thinking about how we could pay it back with interest). Besides that, we have a pretty clean credit history, with his middle credit score being 724 and mine at 696. Do we have any chance of getting approved for a mortgage? FHA maybe?
It is possible to get a mortgage with FHA while you show consistent payments on that debt. You have to meet all the other criteria for the loan of course.
Talk with a an experienced mortgage broker about what your options are and how you can make progress.
My husband and I were approved for an FHA loan this month. I received a letter from Midland Credit Collections the next week on an account over 6 years old. The collections is not appearing on my credit report and has not appeared on my credit report. When I spoke to the my realtor she instructed me not pay it because it would cause changes on my credit report. I don’t know what to do. I don’t want this to stop us from buying a home! What should I do?
How much is the debt for?
Hello,
I noticed that you said all of the collections have to be paid or taken care of in order to get a pre approval. However, FHA does not require one to pay off or settle collections. Can you explain your take on this?
There are instances where manual underwriting can clear qualified individuals for financing with collection accounts unpaid. That has always been the case really, but the number of people that would apply to is pretty small. But there are more and more people that can show they are engaged in an agreed upon repayment plan with a collection account(s) that can still get financing approved (meeting all other requirements of course). This is becoming more common (and was always there in principle not necessarily in reality).
Automatic underwriting will discourage most people when they have unpaid collections. An independent broker willing to work hard for their clients for FHA financing will often yield a better outcome for people with collections and a 620 credit score or lower.
My wife and I have a collection account from 2012 for $27K, that we are disputing for a apartment rental. The balance and allegations are not consistent with the information of the original creditor. We have disputed the account with the three major credit agencies, however they are still present. I was told to set up a payment arrangement and make three monthly payments prior to seeking approval. Is this the only option.? We want to purchase a home ASAP! Our middle score is 660.
I would first look at how you can raise a lump sum in order to settle the old debt and be done with it. This is a viable path to saving the most money and is often better for your credit too.
What amount of money can you raise quickly to settle the debt?
I was contacted by them via mail to settle for $9.4K. I am not willing to pay for something that we do not owe. I thought the new FHA laws allowed these type of debts to be worked through and still obtain a mortgage. Like I said, I am not willing to pay for something I do not owe.
Can you outline why you do not owe the debt?
I actually found a home that I am interested in purchasing, within this month…
The debt is only showing on experian, so should I go to the experian website and dispute this charge?
I would. Post an update if it does not come off and we can go from there.
Ok. Thank you.
Hello. I have a question. My ex-husband had an old debt with a rental place. The collection agency that bought the debt, has now placed this under collections, on my report as well. I never signed for or agreed to his contract. My ex-husband cannot find the original contract, seeing this was a couple of years ago. I want to buy a house, soon, so I sent a certified letter to the collection agency, not acknowledging the debt, but to negotiate a settlement amount or a pay for delete. It has been 30 days and I have still not heard from the collection agency. What should I do? How should I go about getting this removed? The debt is $1722. Should I just pay this, even though it was not mine?
If I am not under contract for the debt I would want to dispute the validity of the debt and not pay anything.
How soon are you trying to buy a home?
Within the next couple of months.
My husband and I are trying to get pre-approved for an FHA mortgage through Quicken. They are using my middle score 646 (my husband’s was 720) because I make more money. Combined we make approximately $100k. Quicken asked me to get some accounts that have been marked as disputed cleared up so they will not say disputed. I have 3 or 4 accounts in collection from my college days and I worry that if I call them to remove the dispute they will reset the statute of limitations. These accounts went into collections around 2011-2012. I am not sure what happens if the dispute notation is removed. Will I still have to pay these open collections to get a loan? If so, will it hurt my credit?
Sorry, the part about using my credit score wasn’t meant to say because I make more money. I meant to say we need both incomes for the loan because I make more money, but his score is better.
No worries. Let me know what the disputes are from or about, the collectors reporting and balances, and I can offer detailed feedback.
I need more information about the collections Ann. What were you disputing? Was this the result of a credit repair company?
Your concern appears to be more about unresolved collections than it is about credit reporting disputes.
Who are the debts owed to and what are the balances?
I have had collections active in my account that are 6 years old and some older. I even had received a letter from one of them (the one with the highest amount) about them not being able to bring me to court because of the age of the account. we had difficulty in 2008-2009 living with one paycheck and a baby on the way. we have asked the help of a debt consolidation/settlement in order to pay for debt we have and not run away. however, for some confusing reason, some accounts didn’t make it to the program leaving me with $4,118. Having said that, we also hoping to apply for an FHA loan in texas. will these account hold me back from getting a loan? are they worth paying or will it just open up a can of worms for me and drop my credit down. my current credit score is 670.
How long until you were looking at applying for the FHA loan?
Who is collecting and/or reporting to your credit about those last remaining unresolved accounts?
were looking to get a home by September this year. The collectors are Calvary, Midland Funding, Portfolio, SW, and Debt Recovery. Calvary was the one that gave the notice of SOL. As of this writing, one account has been removed lowering amount to $3,400.
If the debts that are showing unresolved are not scheduled to fall off your credit reports from age before September, you will want to do something about them. Any unpaid collection debts on your credit will hurt your ability to get approved for and FHA loan.
I would take a really close look at each debt collectors report and make cross reference with the original creditor. If the last payment to any creditor was more than 7.5 years ago you will want to dispute those off. If any will not be more than 7.5 years since the last payment by September, those will be the ones I want to negotiate a settle for a lower pay off.
You are ahead of this right now in order to meet the September goal.
FHA loans with most banks and brokers will have a 620 credit score floor, but there are exceptions. Do you know your credit scores?