Credit Counseling. Please Help

[Anonymous]

Hello everyone,

I could really use some help at the moment.

Some background first.

My wife and I are really trying to buy our first house and I have been working a ton of overtime to get our cards payed off.  My loan officer said we should only use my credit report to get the house.  My wife and I have 2 capital one cards (1 is mine and 1 I am an authorized user on, in December it.  They both had a $1000 limit and they were both around $900 on each card.)  I also have an orchard bank card with a $300 limit that had about $250 on it.  The last card I had was a Targer red card with a $200 limit with $150 on it.  I had my credit pulled and it was a 630.  We will have to get a USDA loan.

Since then I have had my capital one card with the $1000 limit paid down to $366 and had the limit increased to $2000.  The orchard bank card has been brought down to $46 and the Target card has $25 on it.  The card I'm an authorized user on has been brought down to $766.  

I was going to get my credit pulled again in February to see if my score was finally the 660 I needed to get the loan when I got hit with bad news.

I went to school in '06 for one term and found out I have a $1754 tuition bill that is still owed and is in collection.  When my credit was pulled in December it wasn't on my credit report and when I called the collection agency they said that as of this moment it was not on my credit report.  They also said I need to pay it off in full to make sure it doesn't get on my report.  

So now my questions.  1.  Is it better to pay the debt off with the what I have available on my credit cards or should I let it go on my report?  I am not sure which would hurt my score worse.  2.  I believe my statement date on the capital one card with the most money is on 1/27.  Would that hurt my score if I maxxed the card out with the $2000 limit so much that I won't be able to get the loan on the 2/1?.  3.  Should I believe this collection agency that if I pay them that it won't be on my credit report or should I deal directly with my school that I went to in '06?

I hope you guys can provide some insite for me and if you have any other suggestions for me if I missed something I would greatly appreciate it.  I have worked a ton of overtime since November to get everything paid off and I will have another bigger paycheck on 2/15 to get more paid off.  I am also expecting my income tax by the 15th as well.  Please please help!

[js0319]

The last thing you want to do is max out a credit card as you're trying to get a home loan. 

Do you need to get the home loan on 2/1? If you have a refund and larger checks coming, it might be better to take care of the school loan and hold off on the home loan until everything else is situated.

[Anonymous]

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@js0319 wrote:

The last thing you want to do is max out a credit card as you're trying to get a home loan. 

Do you need to get the home loan on 2/1? If you have a refund and larger checks coming, it might be better to take care of the school loan and hold off on the home loan until everything else is situated.

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No I do not need to get it on 2/1.  My rent lease is up on May 12th so I am just trying to get it as soon as possible.

I guess what I am worried about is the collection agency said that the collection isn't on my credit report yet but it can be any day.  That's why I am wondering if I should max my credit card off to pay it off as soon as possible so it doesn't get on my credit report or wait until 2/15 until I can pay it with cash.

Thank you very much for the response.

[MovingForward_2012]

Pay it!!! Getting that collection on your credit report will get you denied and you will have to wait a year before you can qualify!

The added debt to your credit cards will also hurt your score but the minute it is paid back down, your score will go back up versus if you paid a collection on your credit report, your score wouldn't go up unless you got the collection deleted, which can be very difficult and time consuming to do.

The best path forward is to use your checking account funds to pay the tuition bill now. Second best path forward is to put it on your credit cards now if you don't have the funds right now to pay cash. Don't let it hit your credit report! Lenders don't want to see any new collections or late payments in the past 12 mo. Sometimes they will let one slide if your score is well above borderline. If it is not, they may deny you and make you wait until it is 12 months old or require you to pay it.

Before you go for preapproval, you will need to get your balances back down to the levels they are now, as the high balance will decrease your score but not nearly as bad as a new collection on your credit report will.

[Anonymous]

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@MovingForward_2012 wrote:
Pay it!!! Getting that collection on your credit report will get you denied and you will have to wait a year before you can qualify!

The added debt to your credit cards will also hurt your score but the minute it is paid back down, your score will go back up versus if you paid a collection on your credit report, your score wouldn't go up unless you got the collection deleted, which can be very difficult and time consuming to do.

The best path forward is to use your checking account funds to pay the tuition bill now. Second best path forward is to put it on your credit cards now if you don't have the funds right now to pay cash. Don't let it hit your credit report! Lenders don't want to see any new collections or late payments in the past 12 mo. Sometimes they will let one slide if your score is well above borderline. If it is not, they may deny you and make you wait until it is 12 months old or require you to pay it.

Before you go for preapproval, you will need to get your balances back down to the levels they are now, as the high balance will decrease your score but not nearly as bad as a new collection on your credit report will.

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Thank you for the reply.

Now the question is should I believe the collection agency and believe her when she says that if I pay in full it won't go on my credit report or should I pay directly to my college that the original tuition is due?

[MovingForward_2012]

Usually you have to pay the collection agency as the school sold the debt and probably purged it from their systems.

[SnackTrader]

Have you verified that you owe this money? How did the collectors bring this debt to your attention? Have you googled the collection agency or looked them up on the BBB?

I haven't gone through this situation before, and I'm sorry to hear that this is happening to you, but something just smells a little fishy. 

Maybe my sense of smell is off - other opinions?

[Anonymous]

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@SnackTrader wrote:

Have you verified that you owe this money? How did the collectors bring this debt to your attention? Have you googled the collection agency or looked them up on the BBB?

I haven't gone through this situation before, and I'm sorry to hear that this is happening to you, but something just smells a little fishy. 

Maybe my sense of smell is off - other opinions?

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The collection agency is Coast Professional Collection Agency.  They said it was for a tuition when I went to college for a semester in '06.  

They sent me a letter saying it was in collection so I gave them a call and that's where I got the details.  Unfortunately the school was closed when I called so I will be calling them in the morning as soon as they open to get more information if I can.

[ceemee2203]

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@Anonymous wrote:

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@MovingForward_2012 wrote:
Pay it!!! Getting that collection on your credit report will get you denied and you will have to wait a year before you can qualify!

The added debt to your credit cards will also hurt your score but the minute it is paid back down, your score will go back up versus if you paid a collection on your credit report, your score wouldn't go up unless you got the collection deleted, which can be very difficult and time consuming to do.

The best path forward is to use your checking account funds to pay the tuition bill now. Second best path forward is to put it on your credit cards now if you don't have the funds right now to pay cash. Don't let it hit your credit report! Lenders don't want to see any new collections or late payments in the past 12 mo. Sometimes they will let one slide if your score is well above borderline. If it is not, they may deny you and make you wait until it is 12 months old or require you to pay it.

Before you go for preapproval, you will need to get your balances back down to the levels they are now, as the high balance will decrease your score but not nearly as bad as a new collection on your credit report will.

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Thank you for the reply.

Now the question is should I believe the collection agency and believe her when she says that if I pay in full it won't go on my credit report or should I pay directly to my college that the original tuition is due?

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1) You can call the school and ask if you can pay them directly. If they say yes, good, get something in writing though. If they say no

2) Call the CA and tell them you will pay in full by a certain date as long as they agree to not report the CRAs about the debt. Get the agreement in writing before sending payment.

[Anonymous]

1) You can call the school and ask if you can pay them directly. If they say yes, good, get something in writing though. If they say no

2) Call the CA and tell them you will pay in full by a certain date as long as they agree to not report the CRAs about the debt. Get the agreement in writing before sending payment.

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That is a good idea.

When you say to get something in writing, I'm guessing that would be a letter that they would send to me through the mail?  I am sorry if it is an obvious, commen sense answer but I am just freaking out and want to make sure I get everything done.  My wife is already freaking out and I want to get her the best.