09-19-2011 08:19 AM
We had to move to another state due to my husband's job. We were upside down on our mortgage. After 5 months we finally had an offer. It was enough to payoff the first mortgage but not the HELOC. We settled on an amount less than owed with the bank. Just wondering if anyone knows how that will affect our credit, if it's looked at the same way as a short sale. The one good thing about the settlement is that we were required to stay current with the HELOC payments until the account was settled, so there shouldn't be any negative reports of us being late. (My fico was 810 and my husband's was 780... I know this since we just bought another house. ) THANKS!!!!
09-23-2011 04:12 PM
If the HELOC was settled, regardless of the amount accepted by the creditor, it will have a Current Status of Paid. Settled means legally paid in full, regardless of the terms of settlement. Current status does not record terms of the settlement. Paid is paid.
It is possible that the creditor, upon settlement of the account, could have additionally reported a Special Comment of "paid for less than the full amount." That is what most people refer to as a settlement. Creditors will normally only do that on accounts that were delinquent upon settlement in order to record the non-payment of a portion of delinquent debt. It would be kinda shabby, in my opinion, to place such a comment in a consumer's credit file when settlement was accepted on an account in good-standing, as that was their business decision, but I see no reason why they could not do that.
Either way, it wont affect your credit scoring, as FICO does not score the payment of debt, or the amount paid upon settlement. However, such a special comment, if reported, is definately viewed by others upon a manual review as a negative comment. I would complain if the credtior entered such a comment in my credit file.
Just bad business.
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