Buying a Home with Bad Credit
This is the most confusing situation I’ve ever found myself in, and I am in need of assistance! I would like to be able to take out a mortgage within the next year, but I only have $650 saved, and I discovered I have multiple credit issues to fix.
I know my situation could be much more serious than it is, but I’m more than worried about it. It keeps me awake at night. Any input would be appreciated. Hopefully the following bits of information will help you help me.
(EDIT: Original reader question provided a great deal of credit and collection details. They are all excerpted with responses below.)
Is buying a home within the next year feasible? Where should I begin to repair my credit based upon the knowledge I have shared with you?
—Kit
Thank you for all of the details you provided. Because you were so thorough with providing your situation and background, I am going to break out the different credit details you submitted, and quote them below in an effort to make this flow better for later readers. You have a lot going on with fixing your credit in order to get yourself in shape to buy a home next year.
I see the three primary concerns you have to address in order to get a mortgage loan approved as:
- Your debt to income ratio (DTI) impacting the dollar amount of the mortgage you can qualify for.
- Unresolved collections that are showing on your credit reports (some deleted by a credit repair company, but maybe not for long).
- Your credit scores. While they are lower than you want, this is the lowest priority given the details you shared, which I expand on below.
Spoiler alert… I do not think you are that far off from qualifying for a new home loan.
Hire a Credit Repair Company to Fix Your Credit
Anyone reading this site beyond a single article can see that I am a big fan of the DIY approach to debt and credit issues. I am not against hiring a credit repair company. I have had customers share great stories of working with credit repair organizations, and some who have gotten little to no results, but who knew credit repair was going to be a long shot anyway, as there was a bit of a stretch to disputing accuracy and completeness of the negatives that they needed removed.
In your question submission you said:
I’m working to repair my credit; however, I don’t really know where to begin. I first hired a credit repair company to the tune of $100 a month. Since then my credit scores have been bouncing all over the place and I suspect some of the items “removed” may have re-appeared. I have since stopped their services and have been concentrating on paying off debt before it reaches collections.
Keeping your focus on the debts you can keep from going into collection, or that you can pay off for less and get to update as zero balance owed, is where I would want to focus my energy too.
Paying a credit repair company is something I would reserve for when you have only settled and paid accounts to contend with. Trying to challenge legitimate unpaid collections on your credit reports is an uphill battle. And, it is the unpaid collections that have, in my experiences, more of a tendency to reappear, than paid or settled collections.
Resolving Unpaid Collections to Get your Loan Approved
Before the economy hit the skids several years ago, I had customers with unpaid bills on their credit reports that could still get approved for home loans or a refinance. Underwriters could somehow look beyond debts that, while still owed, were passed the SOL to be sued. That just is not happening any more.
In part of the background detail you submitted, you said:
Thinking my credit was fixed, I visited a mortgage broker. The mortgage broker I visited with said I would absolutely NOT qualify for a mortgage (FHA) until all the collections were paid, but I’ve been told by other people that paying them won’t do a thing for my credit score. I just have to wait until they fall off, they say. That might be 2019!! Some folks even told me to file bankruptcy, which made me guffaw.
There is a-lot-a right in what you are being told, but the conclusion of it all should be far more optimistic for you reaching your goals than it sounds. You cannot realistically expect to get a home loan approved these days if you have unresolved collection accounts showing on your credit report. And while paying the collections may not do anything to improve your credit score right away (it can given some time), paying or negotiating lower lump sum settlements can clear the way for your home loan to go through.
You do not have to wait for collections to fall off your credit to get a home loan, but you do want to take care of unpaid debts so that they update to show resolved on your credit reports. Paying debt collectors is not necessarily credit score centric when it comes to reaching your home ownership goal.
Oh… and I should point out that even a chapter 7 bankruptcy on your credit report does not prevent you from getting a home loan, but it generally will keep you out of the market for the first 2 years after you file.
Debt to Income Ratios are a Big Deal for Home Loans
Your Debt to income (DTI) can hold you back from getting a home loan just as much as unpaid bills and low credit scores. You said:
The mortgage broker also mentioned that my debt to income (because of my student loans) may disqualify me for a mortgage altogether (get an education, they said). I do have stable job history (5 years with main job ($65K) and 3 years with part-time job ($6-10K).
Your DTI can impact the size or location of the home you can afford to buy with the minimum amount of money down, or could mean you have to come to the table with a bigger down payment.
So far, of all that you have shared, it is your DTI that could mean waiting a little longer than next year to buy a home. And that would be so that you have more time to pay down debts, and save up money to pay down the size of loan you will need.
Low Credit Scores can be Good Enough to get a Mortgage
Some of the largest national banks set 620 as the low score they will accept to do FHA loans. In limited situations, you can have an even lower score than 620 for FHA loans, but they do not happen often, and few banks will process them under the 620 minimum.
In your questions submission, you said:
She also said I need to have a SOLID 640+ credit rating. In 2013, my scores were approximately 480-540. Recently, they have been bouncing between 612-687. I plan on spending no less than $500-1000 a month to repair my credit and begin saving.
My goal is to have a solid 700+ and buy a house with a decent interest percentage by this time next year (2016. I want my own stinkin’ home before I turn 40 next year); however, I’m not sure that I will be able to realistically achieve that goal…much less ever own a home.
Your lowest credit score is within a few points of qualifying for FHA financing with many major lenders. When you get to number crunching time and you have a 620 credit score or higher, I am optimistic that FICO will not hold you back.
You have many options for shopping your mortgage rate and lender. Do not feel stuck with someone, even if you like them. If the loan officer or mortgage broker only processes FHA loans at a 640 minimum, and you are just under that, you can take your business elsewhere.
If you are able to obtain a 700 or higher credit score to get a competitive rate on your loan, that will be great. But know that you can get good rates through FHA with a lower credit score.
Your Good Credit History can Help Offset the Bad
The work I do has shown me that someone who can maintain, or add positive accounts to their credit reports, will be able to rebuild and recover from collections and financial setbacks faster than someone who had virtually all of their accounts go to collections.
You posted your recent and positive credit history as:
- $22000 car loan. $350 month. Current. Never late. One year old. (My first “new” car—3 years old or less–ever).
- 0 balance GE Money/Synhcrony card. Never late. 3 years old. Required a co-signer for this first credit card ever.
- $221 balance with a $1400 limit Discover card. 5 months old. Never late. My first all by myself credit card.
- $450 balance with a $3000 limit Mastercard. 2 months old. Never late. My second all by myself credit card. We’re finally getting somewhere.
- 0 balance with a $6000 limit installation loan furniture company. 1.5 years old. Never late. Didn’t pay a dime of interest either.
It goes without saying that you want to keep those accounts in good standing between now and when you pick out and get approved for the home you will own.
For the credit cards, keep your credit utilization below 30 percent, or better still, under 10 percent come home loan shopping time.
All of your regular monthly car payments you make between now, and reaching your goal, will help to bring your debt to income ration closer to what you need for a qualified mortgage.
Collection Accounts Holding you Back from Approval for a Home Loan
I have no doubt that some of the collection accounts on your credit reports must be dealt with. Your mortgage broker was spot on. I am going to quote each item individually, with my feedback and questions underneath that.
Negative account history:
$2376 in 6 medical collections from 2012. All are placed with a law firm collection agency (which sued me years ago for medical debt…twice…they scare me). I recently began paying them $75 a month. I’ll thank the credit repair service for alerting them to my location and contact information.
I hear you on the unintended consequences of hiring a credit repair company. Debt collection law firms are not a patient lot. You mentioned your plan of committing 500 to 1,000 dollars a month to resolve collection accounts and improving your credit. This account should be a priority.
- It will take 31 months to pay this at that low of a monthly amount. You have to accelerate your payments to meet your goals.
- You already do not trust these guys based on past experiences. You’re scared, and paying this off quickly will help relieve that.
- I do not trust collection attorneys not to sue, even though you are making payments. They may be able to earn more in fees by suing you, so why not? Putting this one behind you quickly, even if they will not accept a lower lump sum offer, makes sense.
$890 medical collection at local collection agency. From 2013. Was unaware of the bill until recently. Again, thanks credit repair service.
If you can still connect with the original medical service provider, ask if you can come in and pay them directly. If you can do that, and it is the collection agency showing on your credit, you may be able to get this one removed with a later dispute.
Getting this off your credit reports is not critical. A paid medical collection has less of sting to your score these days.
$694 Car repossession with original creditor Progressive Finance in 2012.
You can likely settle this for half or less the balance owed. Priority on this one would be behind the other 2 collections.
$984 gym membership sent to Millennium Financial collection agency in 2012. Let’s hear it for the credit repair service!
Similar to the repossession collection balance, this one could be settlement for half or less, and lower on the priority list.
$591 charged-off bank account showing as a bad check (see recently removed below) with original banking creditor in 2012. Contacted and attempted a settlement. They flat out denied me and advised I pay the balance in full or make payments.
Pay this off at the earliest opportunity, but after the medical debts above. This could create more than just collection and credit reporting issues for you. This type of thing can keep you from opening new bank accounts.
Problem Bills Related to Your DTI Today
You provided some details about problematic accounts. I do not interpret them that way per say. They are current expense realities, and are more related to your qualifying for a mortgage based on your DTI.
You said you have:
3-6 inquiries within the last 2 years depending on reporting agency.
You have the positive credit trade lines and some of the diversity of credit you need. I would not be looking to apply for anything additionally from now until when you get into your new home.
A few hard credit inquiries are normal, and the amount you have today is not out of the ordinary. If these are affecting your score right now, it is only marginally. When the time comes to submit your loan application the older inquiries may have been deleted.
$140,000 in 4 consolidated student loans. Each with a 90-120 day late on them from 2012. I am wrapping up my final degree this summer, and I will most likely qualify for income based repayment &/or consolidation. This will make my loans roughly $400-500 a month and hopefully remove the late payments.
$17000 in interest from above loans.
Congratulations on nearing completion of your degree! If you get these loans consolidated, or can get approved for an IBR plan, it will help.
Your student loan late pays from 2012 on your reports may not impede your mortgage loan if they are still on your reports come approval time.
$466 current hospital bill I pay $100 month on to the hospital, and it is NOT in collections.
$358 anesthesiologist bill I pay $50 a month on that I just found out got turned over to collector even though I have paid it every month since March 14 except October then resumed in November. Original creditor turned it over to TransWorld one week before I paid it in November, but they say they won’t put it on my report since I religiously pay. I asked for a settlement of half. Waiting on a response from them.
$420 therapy bill for child. Pay $40 month on it regularly.
I would just continue to pay these three bills on schedule. If/when cash frees up in coming months, pay them off quicker than you had arranged.
Old Collection Accounts Deleted from Credit Reports can Reappear
And we come full circle back to credit repair and some of the bad credit and collections having been deleted. There is a very real problem with getting negative stuff removed from your credit, only to have something come back on later. Some of the accounts you listed as having been deleted are a source for worry, while others should not be a concern.
You listed the following accounts as having been recently removed from your credit reports:
$1100 payday loan defaulted in 2012.
$1010 payday loan defaulted in 2012.
$550 payday loan defaulted in 2012. Settled in November 2014.
$108 DVD club defaulted on in 2006.
$275 hospital bill from 2007.
The movie club and the hospital bill are now too old to legitimately be reporting. You will obviously be monitoring your credit moving forward, so keep an eye out, but I doubt these old collections will be a problem.
The payday loans could be something to worry about reappearing on your credit. You have to keep an eye out for those as well. If one of the unresolved ones do pop back on your credit, you can look to negotiate settlements on those so that they are reporting a zero balance owed.
I took a different approach to responding to your questions. I have not done that on this site before, but very few readers offer up the details you did, so thanks!
As I mentioned above, your debt to income is likely to be the larger concern of everything you listed. That is the one thing I see that could result in your needing a bit more time than 2016, but that will also depend on the price of the home you are looking to purchase. As of today, what percentage of your take home pay goes to pay your rent?
You can post additional questions in the comments below and we can continue the discussion.
Anyone working on fixing their credit reports, or trying to raise their credit scores to get approved for a mortgage, is welcome to participate in the comments below.
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.
My husband and I have been trying to figure out how to get a FHA Streamline Refinance while the rates are low. Our current loan is 6.25%. If we can’t get this accomplished, the chances of us paying anything on our kid’s students loans (ParentPlus AND the ones in their names, since we promised them we’d cover their undergrad) which will come due in a year or so, are almost impossible. We have two kids in college. Once is about to start her 2nd year of Grad school, so fortunately we’ve not HAD to pay anything on her loans, yet. I tried to talk her out of getting loans to go to Grad school … but she did it anyway. Our son will graduate in a year to a year and a half. I don’t anticipate him going to Grad School, so I expect we will be having to start making payments on these loans no later than sometime in January 2018. We will be paying more for their college than we are paying for our house!! We have already paid for this house 2 times over, and still owe more than it’s REALLY worth. I’ve been working hard to clean up our credit report, from what I’ve read we can get this Streamline refinance with a 620 score, and we’re very close to that. The problem is 3 Default judgments through Sessoms and Rogers. Almost all of these will be dropping off our credit reports in a month or so, and I was so looking forward to that, thinking it meant we’d be set to refinance, but I’ve just discovered that more than likely they would still be considered when we try to refinance. I’m in a panic. There is no way we can get the money to settle these judgments, I’m not sure if we could even come up with half. I can’t bear the thought of them renewing these judgments either, and feel certain they will. We would be living with this over our heads until I’m 65 & my husband 68 yrs old and I honestly don’t expect either of us to live much longer than that. I’m hoping to retire by then, but it wouldn’t be much a retirement, with these judgments still hanging over my head. At the moment, I believe we are “judgment proof” not sure if it will remain that way for 12 more years, though, and of course, we’d like to be able to own a car without the worry of it being taken to settle these judgments. HELP!!!! after figuring some of this out this weekend, I’m feeling more hopeless than I think I have ever felt. My husband is retired on Disability (he gets SSD & a Pension – thank God} but the disability is really what led to these judgments. It took us from 2005-2008 or 2009 to get approved for SSD. He was already drawing his pension, but it was considerably less than what his salary was … so we REALLY struggled those 3-4 years.
Look into whether paying on an established payment plan for 3 months with those judgments will still qualify you for the FHA loan. They do that in other instances.
Hi, I have 9 collections from previous medical bills (I didn’t have health insurance) these are set to come off my credit report in 2018. Would like make my score go up just even a little bit? I would like to be able to buy a house in the near future. Also I paid off 2 other collection accounts in 7/2016. They still show as open with balances. How long does it take for those to show a zero balance?
Once those medical bills fall off from age, your credit will improve. By how much can depend on other things on your credit. What positives are showing in your credit reports today?
Who is reporting the 2 other collection accounts? When did you pay them?
We are looking to purchase a new home in the next year. Newly married – I currently own a home which we will sell and will have a 20% down payment for the new home. My middle FICO is 711 – his is 605 and he has a charge off from 2013 years ago and a card that popped up last January for $791 -he was unaware of (from the ex-wife). Our total debt ratio is around 36. If I were to go without him with my 711 score but debt ratio would jump to 43%. We will pay the collections account. (it is dated Jan 2016) Thoughts on mortgage approval?
If that is the only negative on his credit report he will likely get a decent bump from resolving it after a few months. You will want the better debt to income ration from including him.
Is your loan going to be less than 450k? Look into an FHA loan for a competitive rate.
I am trying to buy a house and found out I have a judgment filed in Texas from 2011 in the amount of 2700 that I have to pay off prior to closing. I want to settle out for 1500. Is that acceptable? I now live in Florida so still no garnishment scan be done.
Watch this video about settling debts when you want to buy a home.
I hope you can help! Here are some facts…
My husband and I are (were?) in the home buying process. We are (probably were) S opposed to make settlement in 20 days.
We both have improved credit at this time. Both our scores are a little above 700. We have an 18% debt to available credit ratio and have only made 1 late payment in over 2 years. We went through underwriting for a mortgage loan without a hitch.
However, while packing for the move we were going through old paperwork. We found something that we completely forgot about…
In late 2007 there was a judgement entered against my husband for a credit card in the amount of $9,000.
We plan on informing our mortgage loan officer tomorrow of this found information and explaining that we had no memory of it at the time of filing out the loan application (we were in no way attempting to commit fraud, just so that’s clear!).
There has been no activity on the judgement since 2008, when they levied an old Bank account which contained .67 cents.
My questions:
Is there a possibly of settling this debt for less? (Optimally $3,000-$4,000)?
Who should we contact?
How do we negotiate a settlement?
What should I have in writing before making the payment?
My perfect plan would be… pushing back settlement a 6-8 weeks, using a portion of the down payment money we have to settle, replacing the money by saving and ultimately closing on the property. We could do this if all the variables fall into place, a long shot I know but I’m hoping for a Hail Mary.
If we wind up having to back out of the deal that’s okay too. We live with relatives, the bank account is my name only, there are no vehicles in his name which is good because I’m terrified of waking the beast…though I know we have to.
Thanks for your site and your help. It’s a great resource to many!
You can indeed settle old debt, including judgments, for less. Whether you can settle for your target amount is a different matter. The judgment balances is likely inflated by interest the court sets. After 8 or 9 years the balance could have nearly doubled. I typically target settling judgment debt for half today’s balance as an optimistic, but still realistic figure.
I normally start off by contacting the judgment creditor. But if the attorney that sued is one I know can be reasonable when settling, I might start there.
Who is the named plaintiff in the lawsuit? What law firm did they use to sue you?
Check out my article that outlines things to know and approaches to take when settling judgment debt specifically.
You do want everything in writing before you pay on the deal, and you will also want them to notice the court of the satisfied judgment. This will often take longer than 20 days, but getting the deal negotiated and paid will often allow some progress to still be made on a home purchase.
If you want help, we do this kind of thing, so reach out for a consult at 800-939-8357, ext 2, or fill out the request at the top of the page.
Hello Mike ,
My boyfriend has a 510 credit score due to a 5000 dollar judgement from an unpaid balance to his divorce attorney. If he does not take care of this matter will there be another judgement added ? Also, if we were to ever get married would this effect my excellent credit score ? Also aparently he has 14 late payments on various diff accounts. He’s 39 years old . Is his credit ruined.? Eventually we wanted to buy a house. He also has a revolving car payment.
Thanks.
There will not be another judgment added, but the judgement does not go away. It can be the cause of a wage garnishment or bank account levy. And while this issue is not going to impact your credit score in any way, you are still going to be impacted financially until it is resolved (when viewing your finances as that of a couple).
No, his credit is not ruined. Late pays, judgments, and most negative stuff on our credit reports will fall off after 7 to 7 and one half years. And late payments that are older will hurt your ability to get credit less and less.
In order to get that home loan you will want later on, the judgment will have to be resolved, and that will be the case whether it is 7 years or older and off the credit report or not.
I am from Florida and working on building my credit to purchase a home. I had a car loan that had gone in to repossession and original loan was closed Sept. 2014. It was sold to a collection agency Cavalry Dec. 2015 and now showing on my credit report. If I agree to payment arrangements would that hurt my credit even more or would it help ?
If you agree to make payment arrangements (send so much money a month until the account is paid off), your credit report will not update to show the account is resolved until after the final payment. This typically will not help your credit until you pay off the debt.
There are some instances where you can still get a home loan approved when you show regular monthly payments being made to an unresolved collection account. I am not a fan of holding out hope for this, as I just do not see this as much as I did before the housing bust.
If you can raise the money to settle in a single lump sum, and for what can often be a better than 50% savings (depends on the situation), this is a better route to improving your credit for a home loan.
Give me a call for a consult if you like. I am available at 800-939-8357, option 2.
Hi Michael – I am making progress in improving my credit score (low 600s) having a few paid collections removed (medical bills) as they aren’t over $60 each. However, I have two big outstanding issues from a few years back as we suffered thru the recession (lost our home and our car but did not file bankruptcy). . I have an unpaid balance to BoA with last payment of 6/11. The total is $5695 and I’d like to somehow have it removed or reduce the negative impact of an unpaid charge-off either by settling it with BoA or paying the balance (that would be very difficult with kids in college & high school) but possibly doable. My credit report only shows the original creditor as BoA and they continue to report. A year ago, I received a letter from NCB Management Services Incorporated regarding the outstanding balance but it doesn’t appear the loan has been sold to them. I’ve been working on improving my credit score but understand I have to deal with this in order to purchase another home. The SOL in my state is 6 years so I still have some time to go. I also don’t want to risk calling them and “poking the bear”. Could you please give me some guidance? I really appreciate this site and your invaluable comments. Thanks!
It could take somewhere on the order of $2,000 to settle the old collection account with Bank of America. How long will it take you to pull that amount of money together?
How soon is your goal to purchase a home?
Is the BofA account the last unpaid account you have to contend with? f there are more, post the amounts and who those accounts are owed to.
The recession was a very rough time for my husband and I. He was just getting out of the Army and was not able to find a job for a good 6 months. During this time we got behind and even had to turn in one of our vehicles. He struggled for years to find a good paying job and get us back on our feet. We would pay what we could on our debt here and there. The last payments being about 2 years ago when his company at the time closed their doors for good. Once again we are back on our feet and seem to be doing better than ever. I have set my student loans up to draft back out of our account again and I am ready to start building our credit. My scores range around 560 and his 610. We would love to buy a house in the next 2 to 3 years and have started building a savings. I am so confused on where to start with paying off our debt so here comes the questions.
1) Because my student loans were delinquent will making the monthly payments on time help my credit or should I just go ahead and take a settlement and pay it off?
2) I keep reading that once I am in collections paying it off still wont help my credit score. It will still stay as a negative mark until it falls off after the 7 years. What can I do to up my score? The only thing good I have going on it is a car payment that I have had for 2 years now that has never been late. Here is what I am showing on my credit:
I have 2 separate loans from World Finance. One for $236 and the other is $393. JH Portfolio has both of them.
I have an installment loan from Springleaf Financial that is showing owed $1415 on Transunion but is showing removed collections on the other 2 and at a higher amount. LVNV Funding has that one. Why would it be showing removed on 2 of them?
I have some other things on there, like a power bill from a roommate gone bad situation that I plan to pay, and some medical bills that will probably clear up with my tax return this year.
My husband shows owing Direct TV $600, Progressive auto insurance $205, Golds Gym $801, and he owed the government $1140 (which they just took out our taxes). I plan to pay everything on his. Does it look better to pay them in full or would I be ok in trying for settlements?
The part that worries me most is that we only have my current car payment going good for us. Everything else has been sitting for years.
If you have any advise to get me started in the right direction to improving my credit I would greatly appreciate it. If you have any questions I would be happy to answer them. I will be an open book.
Are your student loans private, federal, or both?
Given the context of what you have going on, and your goals, that stuff you keep reading about resolving debt not helping your credit any is absolutely wrong. You will not reach your goals otherwise.
When debts are unpaid this long, and in collections, there is really no difference if you pay the full amount with fees and penalties, or negotiate a lower payoff. For this reason I am a fan of saving as much as you can. Just be sure you get any deal you make in writing.
How quickly will you be able to tackle all of those collection? As soon as you are done, or when one of you has resolved unpaid debts on your credit, I might start by opening a secured credit card, or perhaps apply for a low balance unsecured credit card.
Your student loans coming out of default is going to help over this period of time too. I have a new video interview coming out next week about student loans you will want to check out. You might want to subscribe to our debtbytes YouTube channel (click my picture next to the YouTube icon in the upper right rail) for some other things coming out about credit reporting too.
My student loans are federal. Everything on our credit should be paid off within the next 6-8 months depending on how low I can get the settlements.
Can you explain to me what it means when credit karma says something is removed from collections?
You should be in good shape to reach your goals.
I do not know the context of the Credit Karma comment, so I cannot be much help there.
I have had 2 Cap1 Cards charged off last year. I called today and asked about how to repay. I was told that ARS is handling one and Northlands is handling the other. Neither of these people show up on my credit report.
I am trying to get my credit score in order for home purchase.
Cap1 states that When I pay these companies the companies AND Cap1 will give me a letter showing paid to submit to the credit bureaus. From what I’ve seen this tends to not happen.
First, can I settle for a lesser amount with these collectors
2. How do I deal with Cap1 once I’ve paid the accounts with those agencies?
These 2 card accounts make up the bulk of my credit mishaps after losing my job last year.
My scores are around 588 to 612 depending on the bureau currently.
Thanks.
My targets for settling with Capital One are usually at 50%, and that applies to negotiating with Northland Group and ARS National Services.
You will not have to deal with Capital One after the settlements unless the credit reporting from the settlements is not properly updated.
When are you looking to buy a home?
Hi Mike. I just came across this thread today and I think it’s great you reply to people. My name is Nicole. My fiancee Kye and I are looking to buy our first home as soon as it is possible. My mid credit score is 700 I was told but still rising. I keep track of things just following credit karma.com, am on time with all pymts, no collections, great credit utilization, etc. My concern is my fiancee’s score. Credit karma puts his at 556 and 559 right now. Under his report he has one thing under collections for a total of about $4000 from an old credit union (opened date says May 2010) and is reported periodically and 1 public record (tax lien 🙁 ) that has been paid (about $700 from 2014). The collections has not been paid at this time. He recently was approved for a credit card (coming in the mail) and he also got a secure CC through a credit union a few months ago. He is also an authorized user on a couple of my cards which helps a bit I think? I’ve researched a lot and am not sure if we should be doing more than we are now to raise his credit or not. He thinks using the CCs and building up his credit through payments will be sufficient but I don’t know if this builds it fast enough. Is it also worth trying to settle and pay the collection agency?
(To give you an idea of what we are looking for as far as loan, we would lile just an FHA loan or USDA loan)
Thanks for any help you can give on your spare time!!!
You will likely need to resolve the collection account in order to get approved for an FHA or USDA loan. And that is regardless of his credit score.
Who is the credit union and what type of account was it?
I have a credit card from 2004 they apparently. have a judgement against me for this debt dated 2007. I’m in Florida. They called me saying they could put a lean on any property I own up until 2027.. Is his true? The balance is like $4k but they would settle for $3300 or so. I can’t come up with anything close to that but we planned on buying a house in a year or two. Now I’m confused because I don’t want my home being taken away if we buy one. This cc is no longer on my credit report. What do I do? Do they have this right?
Judgment debts do not go away like other debts do.
It is extremely unlikely you will be able to get a home loan through with an unresolved judgment out there, and regardless of it being too old to show on your credit reports. Lenders view more than your credit reports and will find the judgment unresolved as a matter of public record.
You can often settle judgment debts for less than what is on the table now. How long will it take you to raise 2k?
Are there any other unresolved collections that will still show on your credit in a year or two?
The only other thing I see as public record looks like this but I think that this was dismissed for lack of whatever so not sure I’m actually being sued for whatever this is….
DOCKET DATE DOCKET CODE DOCKET TEXT OR BOOK OR PAGE SOURCE
4/24/2007 COCOMP_SC ‹‹-Req $ COMPLAINT FILED RECEIPT: 112150 DATE: 04/26/2007 BM
4/26/2007 SUIS ‹‹-Req $ SUMMONS ISSUED BM
4/26/2007 PRTL ‹‹-Req $ PRETRIAL EVENT: PRETRIAL DATE: 06/05/2007 TIME: 10:00 AM JUDGE: JUDGE LOCATION: ANNEX COURTROOM 1 BM
5/14/2007 SURU ‹‹-Req $ SUMMONS RETURNED UNEXECUTED BM
6/5/2007 PRTL ‹‹-Req $ PRETRIAL BM
6/5/2007 CTCM ‹‹-Req COURT MINUTES BM
6/13/2007 SUIS ‹‹-Req $ SUMMONS ISSUED BM
6/13/2007 PRTL ‹‹-Req $ PRETRIAL EVENT: PRETRIAL DATE: 07/31/2007 TIME: 10:00 AM JUDGE: JUDGE LOCATION: ANNEX COURTROOM 1 BM
7/10/2007 SURU ‹‹-Req $ ALIAS SUMMONS RETURNED UNEXECUTED BM
7/31/2007 PRTL ‹‹-Req $ PRETRIAL BM
7/31/2007 CTCM ‹‹-Req COURT MINUTES BM
2/1/2008 NFTP ‹‹-Req $ NOTICE OF FAILURE TO PROSECUTE SENT ON: 02/01/2008 BM
3/11/2008 DLOP ‹‹-Req $ DISMISSAL FOR LACK OF PROSECUTION DISMISSED ON: 03/11/2008 BM
3/12/2010 RMFD ‹‹-Req $ RETENTION MET FILE DESTROYED PURGE_ID = 1216 ON: 03/12/2010 BM
If that is the only record of the lawsuit, and your credit reports are showing an unpaid judgment against you, it would appear from what you shared that the credit reporting is an error. Have you looked at your credit reports and confirmed there is a judgment appearing?
What is the name of the debt collection agency that called you and made those threats? I suggest you read my article about debt collection scams.
The 1st one that called me that I wrote about is legit and from what you say I have to pay it. Since it is a judgement although it is not on my cresit report anymore.
The 2nd one I shared is the only other thing I found in the court systems website search but it is not on my credit but I assume they don’t have a judgment against me because I can’t find any other information it looks like they tried to get a judgment and never followed through.
Okay, I had not picked up on that court docket information being a second and separate concern. Yes, you will still likely want to negotiate the settlement on the first legit one in order to accomplish your goal of financing a home.
Talked to the debt collector(not the original collector) tonight. Is it normal for them to only want to accept a one lump sum for true original amount?
I was given that option and a monthly payment option.
$3277 was the amount with interest, I could pay $1000 down and 4 $400 payments and 1 $300 payment for a total of $2500 or $1000 down, and $100/month until the $3277 is paid off..
The lump sum is the only one even reasonable to me but I can’t do a lump sum at all!
What to do?!?!
I would wait a week or two and call back if you are not in a hurry. I would stick to my lower offer with a realistic expectation of settling for around 50 to 60 percent.
Is this statement true?
Once the debt goes to a 3rd party it is no longer legal?
I have a judgement but I’m not sure how many companies it’s been though seeing how it’s an 8 yo debt
Just want to make sure I’m crossing my t’s before making a plan with them.
Debts going to a third party is as common as eating lunch. In other words, debts can generally be collected after going to a third party.
Is it also true that once you have a judgement against you they can garnish your bank account with no warning? I’m self employed so they can’t garnish wages.
I rent so they can’t come after my house, my vehicle is still being paid off and we have a boat but it’s in both mine and my hubby’s name so the only thing I have that they can go after is my bank account, correct?
This is so confusing that it’s been 8 years since they sued me and I never knew til a month ago -and now all of a sudden it’s important to them.
What state are you in?
Florida
Florida protects deposited wages in your bank account. Talk to a consumer law attorney practicing in your state and confirm what that will mean to you given your specific set of circumstances.
None of my credit report show any judgments against me for any of the above information.
Which is weird too
Nations recovery center is the name of the debt collector calling from Stone Mountain, Ga.
Is there a way to contact you and go through all my credit report and what I need to do etc to get ready to buy in a year or two? I know there is a fee of some sort so please let me know how I can go about contacting someone like you for help. Thank you!
You can call me at 800-939-8357, option 2 rings to me. You can also email me directly to set up a time for us to speak. My email is the same one you get these comment notifications from.
In trying to get approved for a home loan I have to clear up 3 collections accounts. However, oNe of the collections aged off my report exactly ten days after the bank pulled my credit report. Do I still have to pay the aged off collection? Will the bank pull another credit report?
The bank will pull another credit report.
Are you looking to settle the remaining to, or pay in full? When are the other 2 collections set to drop from your credit?
I paid the other two collections. They were to age off in 2016 and 2017.
Talk to the loan officer you are working with about the new development. Let me know what they say.
Hi, thanks for all your helpful comments! I discovered there is a renewal judgement against me that was filed in June 2014 by a law firm I was sending payments to for an old Discover card account. I had missed a couple of payments before that and when I called them, they said they had, ‘given my account back to Discover’! I figured it up and paid around $15,000 to this law firm before this happened. I never received a notice or anything about the renewal judgement. I was checking my credit score and it just showed up! How do I get this judgement removed? I’m trying to buy a house and can’t get a loan because of it! I can scan and email a copy of the judgement to you, if you’d like. Why hasn’t Discover contacted me about this??? I’m afraid if I contact them they’ll want to start the whole thing over from the beginning and create a huge mess! I am willing to settle with them, but I’m even wondering if they still have the records! The original debt went to the law firm back in 2009, I think! Help!!!
Judgments remain on your credit reports for 7 years. You need to get the court record to reflect the judgment is paid/satisfied. The first step is calling Discover and find out the status of the file, and whether it is with a different attorney, or if it is something they can assist you with internally. Once you know that, and know if the balance reflects all of your payments, you can look to pay the remainder off (probably plus interest set by the court), or negotiate a lower lump sum pay off.
Post what you learn in with an update to this comment string and lets go from there.
If you want dedicated help, fill out the consult request form to connect with me off line.
hello there I’m 26 years old and have a state job making about 60k a year., My credit score is 662. I’m looking to increase my score, and purchase a home within the next year. I am also looking to refinance my vehicle, and when attempting to do so, the lenders tell me that this is weighing heavily on my report so they won’t take the loan. the dilemma I am having is deciding whether or not to pay an opened collection account that is appearing on my credit report. The balance is 6,800 originally from 2008. HSBC bank Nevada. They sold the account to PORTFOLIO RECOVERY
287 INDEPENDENCE
VIRGINIA BEACH, VA
23462
(800) 772-1413
July 5, 2010. I read somewhere on my report that it would drop sometime in 2016. they had brought me to court over it and it was vacated due to indigence. the court finding is not on my report.
Should I wait for it to drop? or attempt to pay it. also when it does drop, is there any point in paying be old balance? will it help my situation?
Look in the court record for where you were originally sued. You want to make absolute certain there is not a judgment entered in the court record. You can go to the court and ask the clerk for help with how to search for your name in their records. And many courts now offer free online access to do the same search from home.
Once you know for a fact that there is no judgment, then decide how soon you want to accomplish your goals. If waiting a year is worth saving, say half of the balance PRA wants to collect, then I would hold out and wait for this to roll off your credit reports.
If you find there is a judgment, post an update and lets go from there.
I have been building a good credit rating since getting a great job 5 years ago. I have recently become able to try to purchase a mobile home. My dad gave me a piece of land many years ago before he passed away. I plan on putting my new home on the land, and using the land as a downpayment. Everything was going fine until the title company found two judgements against me “my property”. Both from a medical center in my hometown. one for 3300 and the other for 25000. they are both from 2006. I am trying to get a USDA rural development loan. I live in Louisiana. I had forgotten about the judgements, and they dropped from my credit report more than 2 years ago. Now I`m in a bind over them. The attorney that represents the hospital told my title attorney they would be willing to settle with a reasonable offer. I`m a middle class working man. My bills are all current. I have 1000 dollars in the bank. I have a truck that is paid for that is probably worth 5000. My piece of land is probably worth 2500. That`s all I have to my name.
What would a reasonable settlement offer be on my part?
50 percent settlements of judgment debts is realistic. There are situations where you can aim lower.
You may be better off filing chapter 7 bankruptcy from a cost perspective. Louisiana protects up to 7500.00 car value in a chapter 7. But talk to an experienced bankruptcy attorney about whether you would get to keep the land. Your state protects up to $35,000.00 of home equity, but I am not sure if that can be applied to unimproved land.
Assume you are in and out of the chapter 7 for a total of $1,500.00; will eliminate those old debts; and qualify for a loan again within 2 or so years. Now compare that to spending $15,000.00 to settle 30k in old judgment debts; however long it takes you to save that up; while still being at risk of wage garnishment etc.
How much money are you able to raise to offer to settle? Can you pull together 25 percent or more quickly?
Judgment debt is good for 10 years in Louisiana, but I could not easily determine if judgment renewal is allowed (most states allow judgments to be renewed for another period of years, and sometimes repeatedly – as in forever). You will want to talk about that with an experienced consumer law attorney. If there is no renewal allowed, you may just want to wait out the next year if the judgment will become a nullity.
Well I’m able to raise 2500 cash right now. That’s what I’m going to offer. I don’t have any visions of grandure that it will be accepted. Judgements can be renewed up to 10 years here. Then they last another 10. I’m solvent. Bankruptcy would probably be an option if I can’t get this taken care of. This is a kick in the pants. I’m afraid now that this inquiry to the judgement lawyer will cause renewal/seizure/garnishment and who knows what else.
That is a real risk now that your account has been brought into the debt collectors focus.
Look into the chapter 7 bankruptcy along side your effort to negotiate the Hail Mary. You can call my hotline for a bankruptcy consult at 800-939-8357 and choose option 3.
Hello Michael,
I used to have excellent credit, somewhere in the high 700’s and never had to worry about getting approved for anything. Within the past 5-7 years, I’ve made some terrible decisions, some of which were out of my control. My credit score has gone down immensely due to lack of payments from school loans and credit cards. I was depressed, and in and out of jobs since college graduation and the recession in 2008. I gave up paying any debt that I had because I was too busy barely make ends meet. Within the past year, things started looking up again. I have a stable, decent paying job and looking into buying a house with my fiancée in the Bay Area. Since I’ve started working on repairing my credit score (from a rock bottom score of 550) and now my Transunion score is at 618, while my Experian score is at 591 (via Credit Karma). Things I’ve done, to repair it thus far: paid off one of the smaller debts that I had and opened up two new credit cards with Capital One (which both line of credits have gone up from $300 to $3000). Now for the bad.
I have a Federal Student loan debt of $30k, a Private Student loan of $21k, a B of A credit card debt of $22k (stacked up from multiple car engine repairs), a USAA credit card debt of $3k, and lastly, a Chase credit card debt of $1,100. Most of these, except the Federal Student loan debt are closed/charged off and possibly dropping off within the next year or two (from what I’ve read at least). I’m trying to figure out if I should wait for them to fall off or try to save up and settle the bad debts in one lump sum at a time? Will calling them to try and settle these debts, RESET the 7.5 year clock? Or do I file for bankruptcy? Credit Karma keeps suggesting me to do so but I don’t know if that will negatively affect me when it comes to getting a home loan. I’ve contacted the CA VA Home Loan and they pulled my credit report with these red flags, so I’m not sure what to do and what my choices are at this point. They’ve asked me to provide some kind of statement that says I’m trying to resolve this. I’d like to do this myself if I can as I’ve heard of horror stories from people not getting very far from using Credit Repair companies. Also, I’d rather out that money towards bad debt or my house down payment. I’m stuck, frustrated and not sure what to do. Please advise. Anything helps at this point. I can provide any more information or talk over the phone if need be.
Calling will not reset the time limit for credit reporting purposes whatsoever.
If you are in California (with a 4 years SOL to file a legitimate debt collection law suit), filing bankruptcy over debts that cannot sue you may not be necessary. If you were not already close to these items being deleted from your credit, I may have a different opinion, but when this close, you appear to be able to achieve your goals sooner by not filing.
If you home loan goals are set for after BofA, USAA, Chase, and the private student loan are going to drop from your credit, focus on your federal loans. I am assuming your federal loans are in default? Also, post the exact dates you last made payments to those other creditors.
Yes, my federal loans are in default. My guess is there’s no way around this and I need to call and start making payments? Exact dates of payment according to Credit Karma are as follows: BofA – 10/29/2009, USAA – 01/22/2013, Chase – 08/01/2010, Navient (Private Student Loan) – 03/15/2012
I would want to bring the federal loans out of default and then look at the available options to enroll in any of the income contingent repayment plans. You can learn more about all of your options at SLBA.
It would be good if you verified your records with what Credit Karma shows you. Credit Karma can be wrong.
BofA credit reporting, and any subsequent debt collector reporting the same account, is inline with my first impression of waiting out the credit reporting limits and the SOL to be sued for collection.
If the Chase credit card reporting last payment is accurate, that will delay things longer, but not much.
If the USAA account is accurately showing the last regular payment date, you may want to consider negotiating a settlement on that one.
Your private student loan with Navient is going to hold you back from reaching your goals too. And if you can potentially still be sued on that account.
I would recommend you call in for a consult so I can dig a bit deeper and make some suggestions from there. My email address is the one you get comment notifications from, so if you want to connect, send me an email reply with your availability and your number.
Hi Michael,
Okay, I will start looking into getting my Student Loans out of default and visiting the SLBA website for some guidance.
I have a somewhat recent (March) credit report from Annualcreditreport.com, I’ll check and see how that matches up with CreditKarma.
I’ll wait for the BofA to fall off. Chase isn’t too much (around a grand or so), I’ll see if I can settle with them. Same with USAA, it’s a little more, around $3k, so I’ll contact them to settle that as well. I’ve called Navient recently, and I was able to get a one-lump sum settlement of $5k (down from $21k), is that good or can I try to get it lower?
I’ll email you my phone # and availability shortly.
I do not think you are leaving any money on the table with Navient if you take that offer. Be sure to get a written settlement agreement from Navient prior to sending your payment.
Asap on the house, I called Midland today and they gave me the phone number if the attorneys who filed for the judgement. I was transferred twice and got a voicemail, I just left my name and said I would call again. I do question whether giving them my address will cause them to be able to garnish my wages?
Not necessarily, but you do need to be as proactive as possible to resolve this with some form of lump sum settlement (if that is the goal).
Yes, I found the house and want to buy. In your experience, does paying it off create much of a dip in the credit score? Have you seen where they waive the 11% ( in my case) interest per year? If offering to settle in a lump sum do I start at 50% of the original amount or 50% of where it more than likely is now: about double the original amount. Sorry for asking so many questions, but I can’t find it any where else. Thank you for taking time to respond.
I do have a post up dedicated to settling judgment debts. It is the longest page on the site.
Most anything you could ask, with tips and tricks, is contained there.
If your credit has already been run by the mortgage broker or loan officer, you can often expect some resistance to settling judgment debts at 50 percent. Debt collectors like Midland Funding will view your home loan goal as you being highly collectable.
I guess I will see what happens tomorrow when I call and post to you afterwards. I was reading the other page last night and will look at it more tonight. Can they tell that the broker has already pulled the report?
Depending on the type of software they use, yes they can see that your credit is being run for home loan purposes.
So I’m reading the other page and it has caused another question. Is there any point to getting the info on the judgement? i.e. when they say they served me or whomever?
If I were negotiating your debt, and trying to maximize the savings, I would want all of that information.
If the wrong address was served, or some other abnormality, I would try to leverage that to get a lower settlement.
So I need to call the clerk of the court and figure out how to get all the background info? Can I send a family member to pick it up?
You can, but call the clerk and ask if they have free online access, and for cases that long ago.
Judgement from Midland funding late 2008. Roughly 3200 with interest and legal fees. I'm not sure I was ever served the papers, also not totally sure the debt was mine. I don't recall having a Providian Card. It was filed in Florida, and I now live in NM. I want to buy a house now, and need it gone.
What do I have to do? Also, does the class action lawsuit against them have and bearing on this?
Are you working under any time constraints with your home purchase goal? I ask because my feedback will vary based on the answer.
Some of your options are going to consume time and money. And, unfortunately, without any guaranteed outcome, it may make the most sense to settle with Midland Funding because it could cost less, and help you reach your goal the quickest.
I do not think there is a court approved outcome on the pending class action settlement with Midland Funding. There was, but enough objections were filed that it did not go through. Were you notified of the class action in the mail?
I have some charge off accounts and collection accounts that are paid by settlement for less than full balance and the 7.5 year marks are coming quickly.
I have heard that when you apply for a large mortgage or line of credit that the credit reporting agencies may report information older than 7.5 years. Is this true, and how will I know whether this information will be reported if I go for a mortgage or something after the collection accounts drop off my credit reports?
The credit reporting agencies may not really scrub the negative items that get deleted from your credit reports after the 7 years. It is possible for older deleted information to be seen in a factual. But I do not think they “report” this in the sense that your credit is being viewed using a risk weighted credit score such as with FICO or Vantage.
If you are declined credit you are entitled to see the report that the refusal of credit was based on. You would know that way.
What are your credit scores today? How many negatives are going to drop off your credit reports, and how many positives will there be?
There were originally 5 credit cards that were settled, and some of those accounts were sent to an outside collection agency. They are all paid up and they should start falling off 2016/17 timeframe.
I probably won’t be looking to buy a home until 2018/19 timeframe. By that point, I should have my school loans paid off and have no debt except minimal credit card debt (using to maintain credit history) and maybe a car loan, depending on whether my car lasts long enough to not have to buy a new one. Because I would like to buy a home in 2018/19 timeframe, my husband and I are basically living on half our income and using the other half to pay down the rest of my school loans and remaining credit cards. We are using 1 credit card and paying it off like it were a debit card to pay for daily expenses. Is there something else we should do to get our scores up high enough to have a good loan rate? Also, I’m in the military, so I’ll qualify for the VA Loan, which I plan to use to buy my first home.
I think you are right on track. I would not add any other loans if you have 2 or more current credit cards already.
I wouldn’t finance a car before you apply for a home loan if you do not have to.
I’m trying to purchase a home, finance company says they can’t finance me until I clear 2 derogatory accounts on my credit report. They are both gas cards issued through Conoco Phillips and Shell which are issued out of Citibank. It states the accounts were closed on 12/2009 and purchased from another company. But they list no phone number or company name. I called them to find out who they were sold to and both said they have no record of my name or account. They referred me to the Recovery Dept. which is an automated system. It asks for my SSN and zip code related to the account. It then says do not call Citi they cannot assist me. and that my account is being handled by a citi approved vendor. It says hold for a representative and my call is being transferred. A recording says “phone service on this number has been suspended your call is being disconnected there is a temporary problem processing your request. Problem with system please hang up and try again”. I called Lexington Law who deal with credit repair problems and even they said they cannot help me because the account is being listed on my credit report in good standing. I can’t see how with a past due balance of $603 on one and a past due balance of $604 on the other. The mortgage lender says no one will finance me until these two accounts are cleared up. But yet no one will tell me who they were sold to so I can pay these accounts. Does anyone have any advice on what to do next
Thank you
I understand the credit repair company did not accept your file? They did not send credit report disputes? Have these two accounts ever been disputed?
With the accounts showing closed and sold off in late 2009, when is that you last made a payment to these accounts? Charged off credit cards are not always immediately sold. The accounts could very well be older than 12/2009 for negative reporting time limitations.
I moved your comment to this post as it is more relative to cleaning up credit to get a home loan approved. Post answers to my questions and I can offer more direct and actionable feedback.
Lexington Law said they could not help me because on my credit report these two accounts are not listed as derogatory but in good standing. The accounts were opened in 2006 and listed as closed and sold to another company in 12/2009. It list on the credit report that these will remain on my account until 2019. We hadn’t made a payment since late 2008 because my husband was laid off from his job. I know these accounts were sold because I remember over the years receiving collection notices from somewhere other than Shell and Conoco Phillips. Lexington Law said they could not get involved because they can only handle cases of negative status. They had told me they had never seen anything like this before. This was from one of their Senior Attorneys. To see an account with a closed/sold, past due 600 and still listed under accounts in good standing. I opened a dispute with Equifax as this is the only of the three credit bureaus that have this listed. Of course it will take 30 days for a response. I listed my dispute as “Refuse to tell me who this account was sold to” All I can do is wait now. Thank you so much for responding.
Post what you learn. Equifax should respond with who they contacted to verify the information with. If they don’t, you can take another approach.
Hello,
Thank you for your prompt response to my mini-novel. You asked “what percentage of your take home pay goes to pay your rent?”. I spend roughly 22% of my post-tax, or net, income on rent.
Any idea about the current prices for the size and location of the home that would appeal to you?
I’m not interested in a home worth any more than $150,000-$180,000. I’d like to keep any future mortgage payments around $800-1200 per month.
Based on everything you shared, if you resolve all collections on your credit reports as quickly as possible, and your income stays steady, and your credit scores are higher than 620 at the time you are house/loan shopping, I think you can meet your 2016 goal.
Use this FHA mortgage calculator to give you an idea of where you may be with loan requirements and affordability next year.
Excellent! Thank you for your guidance, Michael, it is most valuable. I’ll respond periodically to let you know how I’m progressing with these little roadblocks. 🙂
Woot! I made big strides, Michael!
*I negotiated the $984 gym membership gone bad down enough, so I paid it off!!! I made certain to get a PAID IN FULL letter from them!
*I negotiated the$694 car repo, and I’ll be paying it off next week!
*I negotiated the surprise medical bill $890 down to less than half, and I’ll be paying it off within the next two weeks.
*I paid off the three medical bills I was making payments on, so I didn’t risk them going to collections.
*I received a letter from the law firm collections agency stating they would NOT take me to court as long as I pay as agreed, so I’m paying one payment in general to be distributed over all the bills, and I’m snowballing the debts individually. As of now, I only have 5 of them left to pay off. I had 7.
*So, that means I only have the bank to pay off to the tune of $591. They refuse to negotiate…as of now.
*I paid off the balances on my credit cards.
This means the things I had on my credit report will either disappear or show 0 balances. I can’t wait to pull my credit scores next month!!!
Wow! That is quite a bit accomplished in a short period of time!
Please do update with additional comments as you go along. This thread should provide a good amount of inspiration to folks trying to dig out and get home loan ready.
Thank you both so much for sharing. This is really helpful.