Need to consider options on soon to fall-off collections.

[Anonymous]

First time posting.... I was very excited to see that my credit scores jumped 32-34 points into the 600s over the course of 10 months. I had 3 collections age off, but I also stayed on top of my student loan payments as well as taking out a $1800/9 month Lending Circle loan.

I am have been pre-qualified for an FHA home loan that, coupled with generous first time buyer assistance programs in my county, will allow me to buy a home. Unfortuanetly, I still have 4 collections with balances owed and FHA requires that those be paid off before escrow closes. I have funds to pay all balances in full ($3000), but I wanted to see what the best approach would be considering 3 of them will fall off around May, July and October. I tried calling two of the collection agencies and offered 10% (~$400 original balance each), stating that the SOL was long gone and 7 year reporting period was soon approaching. Neither accepted nor did they counter-offer. I called the biggest collection and asked for the 30% offer ($1311 original debt) they sent me back in 2011. They agreed, but then refused to send me a letter with the agreed terms before i sent a payment. I refused making a payment first and ended the call.

So now my options are...

Should I just pay them in full and get on with my homebuying process? PFD letters (longer process) or just pay (faster) and let them report as Paid Collection (FHA just requires that they be paid)?

Based on the fall-off dates of the 3 collections, should I let them fall of and pursue a mortgage later? I'm assuming this will be best for my credit scores, but prolongs the time before we can apply for FHA loans and programs.

or

Should I write settlement letters and offer whatever percentage as payment in full. This option seems less appealing because I know the back and forth mailings can take time, especially if they decline the initial offers.

Any and all suggestions and advice would be appreciated.

[RobertEG]

The fact that a collection has become excluded from your credit report does not mean the debt is discharged.

While it remains in your credit report, any mortgage lendor will clearly become aware of the unpaid, delinquent debt simply by reviewing your credit report.

That does not mean that the unpaid, delnqquent debt will no longer be an issue in subsequent applications for mortgage simply because they dont immediately become aware of it by seeing a collection that remains unpaid.

They may request a disclosure of any unpaid, delinquent debt, notwithstanding the exclusion of collections from yuor credit report.

You would still be obligated to disclose, and they may still require its satisfaction.

If you are happy with the home deal, then I would pay the debt and eliminate it from any potential payment requirements.

If they have made a verbal offer for a settlement for less, that is an enforceable agreement, and you might consider taking their offer even though they wont provide a pre-statement of terms.