Will paying this medical collection help my mortgage scores?

[Anonymous]

I'm working on getting my mortgage scores to where they need to me (after being surprised by the fact that they were a lot lower than my FICO 8 scores).  I've got my mortgage score to a much better spot, but I have an unpaid medical collection with a DoFD of Jan 2014 for $62.  Eventually I plan to pay it, but is it something I should do prior to applying for a mortgage?  Could it hurt me if I pay it?

[Anonymous]

What are your mortgage scores right now, or the last time you checked? 

Mortgage scores also weigh heavily on credit card utilization and installment debt. Paying a collection will help you look good in manual underwriting. Also, depending on the type of mortgage loan you get, you may not need to pay the collection. Talking to a lender may be the best option for deciding that. When you apply, a good lender can give you advice on how to raise your scores or what items you should take care of to get your approval. 

If you can offer the collection agency a "pay for delete", that would be best. That is when you make an agreement to pay the debt in full in exchange for them deleting the record from your account. I only suggest this as having a collection on your reports will hold your scores down until it is either deleted or falls off due to age. 

[Anonymous]

TU - 621, Eq - 630, Exp - 674 (Mortgage FICO scores, beginning of this month)

I have a just reached the goal of getting my CC's to 1 card with 8% utilization, the other four are paid off, but still open.  That hasn't shown up yet in my scores.  I  have a car loan at about 50% utilization, a student loan at about 40% and a personal loan at about 50%.  I will be able to get the personal loan below 30% by the end of this week, so that may help as well.  

[Anonymous]

Paying the loans down is a bad strategy.  It won't hurt your mortgage scores but it will almost certainly not help.  Paying the CC debt down was a GREAT decision.

Without question you should be exploring the Pay For Delete option.  Is this collection your only derog?  Any lates, chargeoffs, liens, judgments, public records?

[StartingOver10]

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@Anonymous wrote:

Paying the loans down is a bad strategy.  It won't hurt your mortgage scores but it will almost certainly not help.  Paying the CC debt down was a GREAT decision.

Without question you should be exploring the Pay For Delete option.  Is this collection your only derog?  Any lates, chargeoffs, liens, judgments, public records?

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This is very important ^^^.  If this collection is the only derog and you get it off, you should see a substantial increase in your scores.  If you have other derogs (collections, Bk's or public records) on your CR, your score may not reflect any increase at all.

[VALoanMaster]

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@Anonymous wrote:

I'm working on getting my mortgage scores to where they need to me (after being surprised by the fact that they were a lot lower than my FICO 8 scores).  I've got my mortgage score to a much better spot, but I have an unpaid medical collection with a DoFD of Jan 2014 for $62.  Eventually I plan to pay it, but is it something I should do prior to applying for a mortgage?  Could it hurt me if I pay it?

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Hi Errathofkosh,

Unfortunately simply paying off the collection account will not improve your scores & in fact, it could actually hurt them. The main thing with collections is to look at the date reported. If the account hasn't reported for a year or more, you're best option is to leave it be unless you can get it deleted. The farther out you get from the account reporting, the less it affects your scores. If the account is reporting every month then your best bet is to negotiate a pay for delete with the CA. In this scenario, your score may go up 20+ points.

Good luck.

[Anonymous]

Thanks for the responses.  I was going to ask about paying down my installment loan next, but even that got answered.  I do have several other derogs that have been paid off, all of which are medical collections.  They were with the same CA and I tried to negoiate a pay to delete, but they wouldn't hear of it.  I'm not sure why I have the one collection left unpaid except that it is older.  I attempted to pay all of debt with them at the time.  I wish I'd found this site sooner, it looks like I didn't handle that interaction correctly.