KD (key derogatory)

[lorenzj4]

I plan on applying for a FHA loan soon. My wife has a few old accounts in collections that i plan to pay at closing, so her score is effected now, plus i dont want the account date to update. I did notice on the Expenian report, they are still reporting a KD every month. Is this the same as a late payment? Do i need to pay this now, so it doesnt effect my chances of getting a loan. Both collections add up to around 2000.

Also the Transunion report has them listed in the collection area. Experian and Equifax have them listed as closed accounts, but there still listed under my revolving accounts and the balances are factored in to my utilization. Does this mean there not really in collections and are conting against me each mont?. Which would stop me from being approved.

Thanks

[MovingForward_2012]

They still go by the Date of First Delinquency (DOFD). So having it update with a KD won't affect your chances of a mortgage as long as the DOFD is old enough, usually 12 months.

I have one unpaid collection on my report with a DOFD of 2009. The collection agency added a KD in Sep 2012, and that updated the collection and made my score drop 50 pts. When they update the collection, it makes your score drop. They do that to try to get you to pay by hoping your score dropped low enough to disqualify you for a loan. But if you still qualify after your score drops and the DOFD is as old or older than the lender requires, you can still qualify. I received underwriter approval last week without a requirement to pay off that collection.

[tooleman694]

I have this crap on my experian report too, underwriter didnt say **bleep** about it.

[lorenzj4]

Thanks for the info.I was starting to worry

[JM-AM]

Okay a little clarification...

Is your wife going to be on the loan?

If her scores do not qualify for approval you will have to find a way to bring her scores up before applying. The collection, CO may not play a part because they are old (YMMV), but if her scores do not qualify it is irrelevant as you will not be able to proceed unless you both qualify.

[lorenzj4]

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@JM-AM wrote:

Okay a little clarification...

Is your wife going to be on the loan?

If her scores do not qualify for approval you will have to find a way to bring her scores up before applying. The collection, CO may not play a part because they are old (YMMV), but if her scores do not qualify it is irrelevant as you will not be able to proceed unless you both qualify.

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Yes. Her middle score does qualify for FHA, its 635.  Hopefully is will go up a little more. Credit card UTL is at 30%. It will be going down to 5% next week

[JM-AM]

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@lorenzj4 wrote:

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@JM-AM wrote:

Okay a little clarification...

Is your wife going to be on the loan?

If her scores do not qualify for approval you will have to find a way to bring her scores up before applying. The collection, CO may not play a part because they are old (YMMV), but if her scores do not qualify it is irrelevant as you will not be able to proceed unless you both qualify.

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Yes. Her middle score does qualify for FHA, its 635.  Hopefully is will go up a little more. Credit card UTL is at 30%. It will be going down to 5% next week

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In my opinion that should give you a little boost and hopefully a bigger boost then expected.

I wouldnt address the collections or charge offs. Just as long as you are willing to pay them as a condition for approval.

I would apply when your ready, and let the application start processing. The LO and or Broker may inform you that there is a possibility you have to pay the collections and such. Just let them know you are aware of that, and you are willing to pay them if it is a condition for approval.

You may have a short bumpy road, but if all else qualifies you should have no issues. Good Luck