Collections and Credit Score

[ladybug982002]

I'm currently planning on applying for a mortgage in the fall, around Oct.  As a result, I have already been calling lenders to get an idea about their policies, since everything varies between them.  At this time, I'm planning on applying for an FHA loan but I am considering convential as well just in case.I know per FHA guidelines, collections under 1000 are not required to be paid off but some lenders still require it.  I have one medical collection that is $460 and its 5 years old. Right now, my mid credit score is 693.  The collection agency is listed on the credit report as well as is their phone number, the account number, on the other hand, is only partially listed.  I want to pay off the collection before applying for the mortgage. What is the best way of trying to pay the debt in full without it lowering my credit score?  In all honesty, I just want to call them and pay the debt and have them just update the account as paid in full or something to that extent. I've heard just by calling a collector though, they may do a hard inquiry.

[750orbust]

If you've got the money, pay it as long as you know the account is really yours. They are required to update it to paid in full. I've never heard of anyone getting a hard pull from simply wanting to pay off a debt. You can try to offer them a PFD but there's no guarantee they'll accept it. If you do not intend to pay it make sure sure you are not still within the SOL of your state before contacting the CA as they can sue you for it. The best bet is to have the money to pay them in hand ready to go before contacting them. Then offer them a PFD. If they do not accept, pay it anyways and then GW the heck out of them and maybe then they will delete. If they don't, a PIF collection looks better to a lender and underwriter than a collection with a balance. Paying off the collection will not lower your fido score but it will not raise it either. It will just look better to potential lenders. Getting it deleted however, could put you over that 700 mark with your credit score. Keep in mind that some lenders require NO collections with balances within the last six months so it might be a good idea to get this resolved as soon as possible.

[aussiesareforever]

That is such an old collection. I think it is likely your lender will not require it to be paid. And it is only a couple $100 dollars. Why don't you take a copy of your credit report with you to a handful of brokers/mortgage companies. They can give you an idea of what they require to be paid or not. That way, you don't have to formally apply for a mortgage until you are ready. If you elect/have to pay it, go the PFD route in order to minimize any impact to your credit score.

[DallasLoanGuy]

why chance it?

if the lender requires.... you can try another lender or pay it thru closing.... title company sends a check to the collection agancy

this way there is no chance of score drop while in processing.

[StartingOver10]

^^^^Exactly. Don't pay it now. The chance your score drops from the payment is high. Better to pay it at closing and not risk a score drop.