Why do they always say pay the old collections?

[Anonymous]

when I have seen here time and time again to not do that unless you can get a PFD.   I have a few unpaid medical collections, all from at least 2002-2003 and when we decided to see if we could refinance an installment loan they said that we needed to pay those.  Why?  We have perfect payment history for the last 2 years.  We are hoping to apply for a mortgage in or around April or May and I have been told time and again do not pay those or they will look new.  What to do?

[Anonymous]

LOs on here have said...collections are not required to be paid for FHA...but the lenders may say...they need to be paid....in regards to medical collections...they are handled differently than other collections...if you can...use the Hipaa Process....they should have all the info in the credit from...or at....

Message Edited by llecs on 06-25-2009 12:10 PM

[Anonymous]

If these CA are paid and that reages the account doesn't that look bad on a home loan application?  It will make it look like the CA accounts are recent.

[Anonymous]

If you do pay them you could see a score drop because of new activity on them. Bottom line - don't pay them until and unless you're told to by the lender as a condition of your approval. I think I've also seen DLG say that if you get an LO who says to pay them - find another LO.

I'm sure others (Like DLG and/or Shane) will weigh in with a more experienced opinion.

[Anonymous]

FHA does not require that collections be paid, but many other loan programs will require them to be PIF.

If you get a good LO and a great mortgage package but the lender wants the collections paid then that is probably worth it.  If the place seems shady and the LO starts telling you to pay stuff off prior to close then you might want to check around.

Even within an FHA loan, each lender and/or investor can have their own qualifications for what they will or will not accept.  Alot of people want collections paid off to make sure you don't get into any lawsuits or such.  Also, refusing to pay a collection that is valid looks bad to a lender or investor as you are not meeting obligations.

It is definitely a case by case situation.

[DallasLoanGuy]

What sly and desi said.

Get a second opinion.

paying them may or may not hurt you, but why risk it. pay them after you get the mortgage if you can.

even conventional loans rarely require something to be paid