Collection Mail during Mortgage Process

[Anonymous]

I'm in the process of buying a house- have my pre-qual, about to make an offer tomorrow, and I just got a letter from a collection company yesterday- if this hits my credit before closing (it hasn't yet) it's really going to mess things up- what is the best course of action? Can I call the collector and just offer to pay for not reporting? Help!!!

Thank you!

[ShanetheMortgageMan]

Not sure what the best course of action to address it is, but the underwriter will see it on the credit refresh (happens just before closing) and will most likely want to see how it has impacted your scores (re-checking credit).  If you have a lot of points to spare, it may not be the difference between getting approved or not, but it most likely will have an impact on your interest rate.  Definitely want to address it ASAP, I suggest you post in the Rebuilding Your Credit section.

[Anonymous]

Thank you for your Response. Will it make a difference that it is a several year old medical collection?


Can a mod please move this post? I don't want to double dip.

[ShanetheMortgageMan]

The collection agency usually doesn't report when the original debt occurred, just when it was sent to collections.  So I don't think that'll matter when it comes to impacting your score.  Medical debt is usually not a big issue when qualifying for a mortgage though, so as long as your score still qualifies it most likely wont make a difference if you can qualify or not.

[Anonymous]

Well I'm no expert but I do have some thoughts to try/think about.

1. Contact the original care provider and ask them to recall the collection. This will allow you to work out payment with them and avoid the CA

2. Contact the CA and negotiate a settlement for them to agree to not report any information. Get it in writing before sending certified funds

3. If the above two aren't an option send a timely DV in response. This will bar the CA from taking further action until the account can be verified. This includes credit reporting. That may buy you enough time to close ;-)

You did say it was several years old. It can only be reported for 7 years so if it is past that a simple cease and desist would take care of it but only if it's time barred from reporting.

[RobertEG]

I would recommmend contacting the debt collector and offering a pay for not reporting agreement.

The dunning notice sent by the debt collector should have provided the name of the creditor and the amount of the asserted debt.

From that information, you should normally be able to recognize the debt.

Do you recognize the debt?  Do your records show when it first became delinquent?

If/when a debt collector reports a collection, they must also provide the date of first delinquency on the OC account to the CRA.

The CRA will then use that reported DOFD to determine when the collection must be excluded from the consumer's credit report.

If you recognize the debt and know the DOFD, you should be able to determine whether or not, even if they do report, it will see the light of day by inclusion in your credit report.