How bad is new collection going to hurt?

[Veloter]

Just sold our house and are moving to another state.  Was getting all our ducks in a row for a new mortgage and a collection of $169 for an old parking ticket shows up.  I honestly don't remember getting it and it could have been my daughter.   I'm not sure if this will be a dealbreaker or not.  Our file otherwise will be strong....20% down, scores around 660, all credit cards will be paid off and DTI will be within range.   Should I worry?     

[ShanetheMortgageMan]

Probably won't hurt much.  When does it say the collection is from?  How has your credit been for the past 24 months otherwise?

[Veloter]

It's been ok.  Had a student loan that my husband co-signed for my daughter go bad, but paid in full this year.  There is a two year old CO from Dell that I have disputed because they were not crediting my payments.  Other than that, we have a perfect mortgage history for 15 years and all of our credit cards have been current.    The collection says that the date of delinquency is 8/12, but just started reporting in January.    We did have some lates, but they were about 3-4 years ago.

[ShanetheMortgageMan]

You'll want to remove the dispute before credit is checked, assuming you are planning on using conventional financing (you mentioned 20% down), as disputed accounts will nullify the automated underwriting approval you get (or prevent you from getting one all together).  You'll really improve the rates you can get if you can increase your score to a 680 by the time you have your credit checked as well.  Sometimes collections appear on credit months or even years after they actually became a collection, as a method for the collection agencies to get the money they can collect on.  So since it appears that this collection was from 8/2012, or nearly 1.5 years ago, I think you'll most likely be OK.  Just be prepared to write letters of explanation for all of your delinquent credit so the underwriter knows what is going on (apparently you have a young adult daughter).  Since our cars were registered to my parents, they got plenty of parking violation tickets from me and my brother when we were that age.

[Veloter]

Yes, I will remove all dispute comments.  I think I'm going to pay it so when they pull, it shows paid instead of outstanding.  I know it won't help my score, but maybe it will "look" better.  

I have a 660 score right now on the other two credit reports, and will be paying off all credit cards and bringing utilization from 46% down to less than 1% so that should give me a nice bump.

Yeah, those parking tickets in college really add up.  I'm surprised that only one hit our report.....

[DallasLoanGuy]

offer them a 'pay for deletion'.... that would help a lot

[Walt_K]

If you can't get them to agree to PFD, I would see about paying the collection at closing rather than paying it right now.  Paying a collection is not supposed to affect your score, but there are tons of reports on here of people paying them and seeing their score take a major hit due to some type of updated reporting of activity on the collection.  If it is an issue for your lender, you should be able to have your lender agree that you can pay at close.  That way there is no chance that you see a decrease in your score.