04-07-2011 01:41 PM
Hi everyone, I have been lurking and reading and all of you posts have helped me tremendously!
I have a question though. I have recently been preapproved for and FHA loan with a midscore of 668. I have one collection account with Asset Acceptance and I currently have a payment plan with them. I am 2 more payments away from being paid off. This only shows up on my TU report. This account also shows "Account information disputed by consumer, meets FCRA requirements".
My LO said that I need the dispute comment removed. Ok, I can do that. He said I don't need to pay this off before closing. I'm nervous that this will drop my score once its paid in full because of the date of Last Activity. I don't want to abandon my payment plan because I'm almost done (May is the last month).
Any advice on what to do? I feel stuck because I really don't want this to bring down my score. Any ideas how this will play out?
Thanks in advance!
04-08-2011 11:12 AM
Your fears about date of last activity are unfounded. Paying off a collection will not hurt you (or help you). Collections are scored the same whether they are paid or not. However, most often, lenders do require that collections be paid in full before closing. Since it will have no impact on your credit score, I would just pay it in full now and be done with it.
04-08-2011 11:16 AM
However, most often, lenders do require that collections be paid in full before closing
Acutally if the borrower has a payment plan documented with the collection agency, that is fine for most FHA lenders.
04-15-2011 09:09 AM - edited 04-15-2011 10:25 AM
Disregard - MarineVietVet to save the day.
04-15-2011 10:11 AM
MBOhio - your information is partially incorrect. Yes, there is no difference in scoring for FICO purposes between a paid and an unpaid collection.
However, as the OP pointed out, paying off a collection will cause the last reported date to be updated, which will make the tradeline look like a recent derog and drop his score. Collection damage decreases over time, but updating the tradeline will make it clean and fresh and score-hurting. He had a valid concern, but no - most lenders will not mind the drop unless there is a new derogotory item.
This doesn't apply to collections. I have been guilty in the past of spreading this in error. Since HTSU explains things MUCH better than I can I will C&P this from one of her posts:
Collections are scored off the date of assignment, not the DOLA. A change in DOLA shouldn't affect the score. .
This is such a common belief that we're trying to find examples with before-and-after reports where it happened, in order to see what's going on. If either the CA or the CRA is handling the data incorrectly, it needs to be corrected.
Here's a thread discussing this: Settle or Pay in Full?
Again, I'm not saying that it doesn't happen, but it's not supposed to, if the CA is reporting correctly and if the CRA is putting the info into the correct data fields.
From a BK years ago to:
EX - 9/09 pulled by lender 802, EQ - 10/10-813, TU - 10/10-774
"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".
IMPORTANT INFORMATION: All FICO® Score products made available on myFICO.com include a FICO® Score 8, along with additional FICO® Score versions. Your lender or insurer may use a different FICO® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more
FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Score and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating. FTC's website on credit.