topic Paying charge offs or not in Mortgage Loans

Paying charge offs or not

lemers718 — Mon, 15 Jun 2009 20:18:06 GMT

I am working on rebuilding my credit after a divorce that crippled me financially. My forclosure will be 3 yrs old July 2010. and I plan on FHA mortgage hunting again at that time. I have been on time for the past 2-1/2 yrs. Score now mid 600's. However I have 1 Cap one Charge off from 06 that keeps updating. I have heard mix advise on should I settle it or just let it go. It is killing my utlization. Will FHA approve a mortgage with a charge off? And if I settle will it show up as a recent late?

Re: Paying charge offs or not

scorerise — Mon, 15 Jun 2009 21:34:14 GMT

If you pay it, do it now. If that is your only current negative, you can show 12 months good credit when you apply for your mortgage.

I think the advice to not pay a CO is if isn't reporting negatively each month. I'm not sure though because I am in the "pay off CO" camp no matter what. Under manual review, your LO may require you to pay it anyway.

Re: Paying charge offs or not

ladyofnight — Mon, 15 Jun 2009 22:36:05 GMT

I believe they will if it's over 12 months old. You could try to make a deal with them to pay for a delete. Make sure you have this in writing and i wouldn't pay it until they agree :)

Re: Paying charge offs or not

hammer192 — Tue, 16 Jun 2009 06:48:10 GMT

I settled a charged off cap 1 account back in march. It was still with the cap 1 showing a balance of $587 after I paid the settlement amount of $1300. After it finally reported a zero balance on my credit reports my TU score jumped 56 pts. My EQ only bumped up 11 pts. I had 3 other charge offs that were with the OC's and each time my score was positively affected by them being paid.

I also had 2 charge offs that were with CA's. I settled both of them and neither negatively affected my scores. One was with Portfolio Recovery for 5,700 and the other was with Midland 4,600. They still show date of last activity at 2004.

Since my Dola wasn't changed, does this mean fair isaac has been changed so as to not penalize people for paying there collections?

Re: Paying charge offs or not

ladyofnight — Tue, 16 Jun 2009 11:34:19 GMT

You should be aware that it's not uncommon for scores to actually go down when you pay collections. Most commonly happens when the collections are old and they update when you pay them off. Best bet it to get them to delete it for payment. Paying off newer collections can bump your score though, as hammer experienced... although i'd still work for a delete in those cases too ;)

Re: Paying charge offs or not

hammer192 — Tue, 16 Jun 2009 13:44:00 GMT

My collections were 5 years old. The bump in score was from those that were still with OC and affecting my Utilization.

Re: Paying charge offs or not

lemers718 — Tue, 16 Jun 2009 14:45:49 GMT

Did you settle directly with Cap one or with the CA?

Re: Paying charge offs or not

DallasLoanGuy — Tue, 16 Jun 2009 16:39:22 GMT

If you are over 620, paying this does not help you.

FHA doesn't require collections/chargeoffs be paid. Most lenders do not require them paid either.

Re: Paying charge offs or not

hammer192 — Tue, 16 Jun 2009 17:50:59 GMT

I called capital one directly and told them I wanted to settle. They gave me an offer of 50% off. If you decide to settle, make sure you get it in writing first (fax) before giving them any money. Send them a money order with a copy of the letter overnight mail.

Re: Paying charge offs or not

scorerise — Tue, 16 Jun 2009 19:50:04 GMT

DallasLoanGuy wrote:
If you are over 620, paying this does not help you.
FHA doesn't require collections/chargeoffs be paid. Most lenders do not require them paid either.

I paid mine not just to qualify. I owed those debts andI wanted peace of mind that I wouldn't get phone calls from new CAs or the hassle of disputing CAs that show up on CRs after 7 years. For me it was worth it.

Re: Paying charge offs or not

lemers718 — Wed, 17 Jun 2009 22:18:27 GMT

ok Today I called Capital one to settle and they refused to settle with me directly claiming I had to go thru Trak America. I refuse to deal with these scam artists. So I guess Cap one does not want their money.

Re: Paying charge offs or not

HingVA — Wed, 17 Jun 2009 23:05:51 GMT

Yes I was told by a lender that you need to pay off all collections even if it was from a few years ago. I had to do the same thing before i could even get started on some kind of loan process. I just paid off my last collections and if you send them a letter of agreeing to pay for delete letter they might agree to do so. Try that first so that way they could just even take it off your report for good. Good luck!