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New Member
improving2013
Posts: 5
Registered: ‎06-11-2013
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Pay in Full Vs Settle/ Pre Approval Mortgage Conditions

I recently (along with my fiance) got pre-approved for a mortgage.  My scores are in the low 700s. - up about 100 points from this time a year ago.  HIs scores are about 100 points higher than mine.  The pre approval came with a condition that I respond to an outstanding collection account that originated 6 years ago.  The past couple of years I've had to come face to ugly face with several past credit mistakes- this one involves an old fitness membership that I am fully aware that I am responsible for.    It's for about $500.

 

Now in the past I have taken advantage of settlement offers or crossed my fingers and prayed that the SOL would run out and these things would "fall off" my credit report (incredibly irresponsible, I know).  My gut is telling me that more so than this account actually having a large impact on my credit scores at this point (seems to be minimal), the potential mortgage lender is likely more concerned with the fact that I take care of the actual obligation (pay in full).  Anyone see any benefit to settling instead of paying in full?  Anyone have a similar experience?  Replies requested soon as I plan to take care of this in the next couple of days.  Thank you in advance.

Valued Contributor
rckstrscott
Posts: 2,659
Registered: ‎04-25-2011
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Re: Pay in Full Vs Settle/ Pre Approval Mortgage Conditions


improving2013 wrote:

I recently (along with my fiance) got pre-approved for a mortgage.  My scores are in the low 700s. - up about 100 points from this time a year ago.  HIs scores are about 100 points higher than mine.  The pre approval came with a condition that I respond to an outstanding collection account that originated 6 years ago.  The past couple of years I've had to come face to ugly face with several past credit mistakes- this one involves an old fitness membership that I am fully aware that I am responsible for.    It's for about $500.

 

Now in the past I have taken advantage of settlement offers or crossed my fingers and prayed that the SOL would run out and these things would "fall off" my credit report (incredibly irresponsible, I know).  My gut is telling me that more so than this account actually having a large impact on my credit scores at this point (seems to be minimal), the potential mortgage lender is likely more concerned with the fact that I take care of the actual obligation (pay in full).  Anyone see any benefit to settling instead of paying in full?  Anyone have a similar experience?  Replies requested soon as I plan to take care of this in the next couple of days.  Thank you in advance.


I would try to settle with a pay for delete.. if it is 6 years old, they might do that..

 

what is the collection agency involved? 

 

I personally paid all my collections in full for the very reason you mention, I  was going up for a mortgage...

 

The account is 6 years old, but how old is the original debt?

 

-scott

Starting FICO Score: 10/10: TU 498 | EQ: 502 Current FICO Score(lender pull): 05/12: TU: 722 | EQ: 712 | EX: 686
Collections Removed: Hunter Warfield, CBE Group, Merchants Credit Guide, EOS-CCA, Enhanced Recovery, Portfolio Recovery, UCB, American Collection Company, Medical Business Bureau, Jefferson Capital, Credit Portfolio Associates, FCO, LVNV, Convergent, Armor Systems
Other Negative Entries Removed:Plains Commerce CO, HSBC CO, 2008 Judgment Santander Reposession

Still Working On: Illinois Paid Tax Lien,
Positive Accounts:10/10: 0 | 07/12: 6 | Mortgage Closed 5/12, Macy's AMEX $3900, Citi/Home Depot $2000, Capital One Cash Rewards $1500, Capital One Secured $500, Credit One Bank $500. Total Utilization: 6%. AAoA: 1yr, 7mth. INQS: 8 TU, 8 EQ, 4 EX
New Member
improving2013
Posts: 5
Registered: ‎06-11-2013
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Re: Pay in Full Vs Settle/ Pre Approval Mortgage Conditions

RFG.  I should have been more clear.  The original account was from 6 years ago.  Not sure when the collection agency took it over.  From what I've read doesn't pay for delete take a while (letters in the mail back and forth etc)??  I am trying to get this taken care of ASAP.  Aside from a pay for delete, what other options might I have when calling with the payment offer (even if it is pay in full?)  ie can I demand that they mark the account as paid in full, or will that happen automatically- etc?  I don't want to fork over the money only to have this still causing me problems down the road :/

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rckstrscott
Posts: 2,659
Registered: ‎04-25-2011
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Re: Pay in Full Vs Settle/ Pre Approval Mortgage Conditions


improving2013 wrote:

RFG.  I should have been more clear.  The original account was from 6 years ago.  Not sure when the collection agency took it over.  From what I've read doesn't pay for delete take a while (letters in the mail back and forth etc)??  I am trying to get this taken care of ASAP.  Aside from a pay for delete, what other options might I have when calling with the payment offer (even if it is pay in full?)  ie can I demand that they mark the account as paid in full, or will that happen automatically- etc?  I don't want to fork over the money only to have this still causing me problems down the road :/


Well, it can cause you problems down the road until it falls off, which would be about a year and a half..

 

Technically paying a collection account should not help your score, but it also should not hurt it.. technically.. sometimes it updates and scores go down..

 

The tag 'settled less that full balance' - 'paid in full' ect have no bearing on the score itself, they are merely tags... an underwriter however, might look at 'settled less than full' more negatively than paid in full... if your loan officer wants it paid in full, then he knows his underwriters and what they like to see.

 

PFD's can take months, years, weeks, days, seconds.. it just depends on who you reach..

 

6 years old? I don't think settled vs paid will be that big of a deal. are you going FHA or conventional? Does you loan officer have an opinion? Could you just wait til close to pay? That way the settled vs paid in full vs possible score dip is completely irrelevant

 

-scott

Starting FICO Score: 10/10: TU 498 | EQ: 502 Current FICO Score(lender pull): 05/12: TU: 722 | EQ: 712 | EX: 686
Collections Removed: Hunter Warfield, CBE Group, Merchants Credit Guide, EOS-CCA, Enhanced Recovery, Portfolio Recovery, UCB, American Collection Company, Medical Business Bureau, Jefferson Capital, Credit Portfolio Associates, FCO, LVNV, Convergent, Armor Systems
Other Negative Entries Removed:Plains Commerce CO, HSBC CO, 2008 Judgment Santander Reposession

Still Working On: Illinois Paid Tax Lien,
Positive Accounts:10/10: 0 | 07/12: 6 | Mortgage Closed 5/12, Macy's AMEX $3900, Citi/Home Depot $2000, Capital One Cash Rewards $1500, Capital One Secured $500, Credit One Bank $500. Total Utilization: 6%. AAoA: 1yr, 7mth. INQS: 8 TU, 8 EQ, 4 EX
New Member
improving2013
Posts: 5
Registered: ‎06-11-2013
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Re: Pay in Full Vs Settle/ Pre Approval Mortgage Conditions

I'm afraid to even ask if they have an opinion, to be honest... I feel like if they are willing to give us a mortgage for X amount of money, they probably want to see it paid off.  Maybe it was even silly for me to post here... being that I am pretty sure I am going to pay it in full anyway... just was curious of anyone else's experience.  I think I've pretty much talked myself into paying it in full...I guess I just feel like it will "look" better.  Truth be told, if there weren't a mortgage in the picture- I would probably just settle for the least amount of $ they will take and be done with it.  (I think maybe that is the  irresponsible, "6 year ago" me talking now LOL).

 

You say it could  "cause problems down the road until it falls off"- is that even if it is paid in full???  See these are the things I don't really know.

Valued Contributor
rckstrscott
Posts: 2,659
Registered: ‎04-25-2011
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Re: Pay in Full Vs Settle/ Pre Approval Mortgage Conditions

[ Edited ]

improving2013 wrote:

I'm afraid to even ask if they have an opinion, to be honest... I feel like if they are willing to give us a mortgage for X amount of money, they probably want to see it paid off.  Maybe it was even silly for me to post here... being that I am pretty sure I am going to pay it in full anyway... just was curious of anyone else's experience.  I think I've pretty much talked myself into paying it in full...I guess I just feel like it will "look" better.  Truth be told, if there weren't a mortgage in the picture- I would probably just settle for the least amount of $ they will take and be done with it.  (I think maybe that is the  irresponsible, "6 year ago" me talking now LOL).

 

You say it could  "cause problems down the road until it falls off"- is that even if it is paid in full???  See these are the things I don't really know.


I meant could cause problems aka scoring dings until it falls off. A Paid in Full account still hits as a collection account in th scoring model.. paying it off SHOULDN'T change your score.. but collection agencies sometimes will miscode it on purpose and it will re-ding you..

 

Personally, I was in your position, and I paid them all in full. For the same reason -- HOWEVER, you could clarify with them on what the condition is, if the condition is pay in full or just having a 0 balance.. but yes. I paid them all in full, and then send letters and or emails to delete..

 

You could always just call to pay in full and flat out tell the rep you will pay in full if they will delete.. some companies still delete when you do that.. I just had a friend do that with one account.. then if they say no, just pay it in full, and immediate write a letter to them asking for the deletion..

 

In your letter. You can have some verbiage in there like 'I paid the full amount, without trying to settle or haggle, and I am hoping you can grant me a good will gesture of deleting this account from my credit file. The FCRA requires that all accounts reported are reported accurately, but it does not mandate that all accounts have to be reported. I hope you consider this removal in my situation"

 

-scott

Starting FICO Score: 10/10: TU 498 | EQ: 502 Current FICO Score(lender pull): 05/12: TU: 722 | EQ: 712 | EX: 686
Collections Removed: Hunter Warfield, CBE Group, Merchants Credit Guide, EOS-CCA, Enhanced Recovery, Portfolio Recovery, UCB, American Collection Company, Medical Business Bureau, Jefferson Capital, Credit Portfolio Associates, FCO, LVNV, Convergent, Armor Systems
Other Negative Entries Removed:Plains Commerce CO, HSBC CO, 2008 Judgment Santander Reposession

Still Working On: Illinois Paid Tax Lien,
Positive Accounts:10/10: 0 | 07/12: 6 | Mortgage Closed 5/12, Macy's AMEX $3900, Citi/Home Depot $2000, Capital One Cash Rewards $1500, Capital One Secured $500, Credit One Bank $500. Total Utilization: 6%. AAoA: 1yr, 7mth. INQS: 8 TU, 8 EQ, 4 EX
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improving2013
Posts: 5
Registered: ‎06-11-2013
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Re: Pay in Full Vs Settle/ Pre Approval Mortgage Conditions

Re the scoring dings:  due to clearing up several other old accounts and paying off all current cc balances- I am pretty happy with my scores where they are now.  So I think I will do what you suggested, call to pay in full and ask for deletion- and then if they don't agree over the phone, send them a certified letter asking them to do so.  I know its silly for me to be on HERE asking for advice rather than just calling the collection agency- but honestly. it makes me anxious just THINKING about calling them LOL.. and so when I DO plan to call them (tomorrow I think) I just want to be sure I have my ducks in a row and just be able to take the path of least resistance.  One last thing I think- if I do pay in full, are they generally willing to submit a letter or email to you stating that you did in fact pay in full?  As I've said before, I don't want my efforts to be for naught- I don't want tp pay it but then have it still show up as an outstanding account. 

Valued Contributor
rckstrscott
Posts: 2,659
Registered: ‎04-25-2011
0

Re: Pay in Full Vs Settle/ Pre Approval Mortgage Conditions

[ Edited ]

improving2013 wrote:

Re the scoring dings:  due to clearing up several other old accounts and paying off all current cc balances- I am pretty happy with my scores where they are now.  So I think I will do what you suggested, call to pay in full and ask for deletion- and then if they don't agree over the phone, send them a certified letter asking them to do so.  I know its silly for me to be on HERE asking for advice rather than just calling the collection agency- but honestly. it makes me anxious just THINKING about calling them LOL.. and so when I DO plan to call them (tomorrow I think) I just want to be sure I have my ducks in a row and just be able to take the path of least resistance.  One last thing I think- if I do pay in full, are they generally willing to submit a letter or email to you stating that you did in fact pay in full?  As I've said before, I don't want my efforts to be for naught- I don't want tp pay it but then have it still show up as an outstanding account. 


Think of it this way.. You either hav to pay the account, or have the account not showing by the time you close. Period.

 

So you have limited options.. The account cannot have a balance.. 

 

I am fairly confident, as have just went through this, that if you pay in full, that will be that.. your score wont' go up, but your condition is met. Then you can send letters to try remove it, just to have it gone.. you dont need to send those letters certified..

 

-scott

Starting FICO Score: 10/10: TU 498 | EQ: 502 Current FICO Score(lender pull): 05/12: TU: 722 | EQ: 712 | EX: 686
Collections Removed: Hunter Warfield, CBE Group, Merchants Credit Guide, EOS-CCA, Enhanced Recovery, Portfolio Recovery, UCB, American Collection Company, Medical Business Bureau, Jefferson Capital, Credit Portfolio Associates, FCO, LVNV, Convergent, Armor Systems
Other Negative Entries Removed:Plains Commerce CO, HSBC CO, 2008 Judgment Santander Reposession

Still Working On: Illinois Paid Tax Lien,
Positive Accounts:10/10: 0 | 07/12: 6 | Mortgage Closed 5/12, Macy's AMEX $3900, Citi/Home Depot $2000, Capital One Cash Rewards $1500, Capital One Secured $500, Credit One Bank $500. Total Utilization: 6%. AAoA: 1yr, 7mth. INQS: 8 TU, 8 EQ, 4 EX
Moderator Emeritus
llecs
Posts: 32,880
Registered: ‎08-04-2007
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Re: Pay in Full Vs Settle/ Pre Approval Mortgage Conditions


rckstrscott wrote:

The tag 'settled less that full balance' - 'paid in full' ect have no bearing on the score itself, they are merely tags... an underwriter however, might look at 'settled less than full' more negatively than paid in full... if your loan officer wants it paid in full, then he knows his underwriters and what they like to see.


FICO does score TLs with a settlement comment on par as a CO.

Valued Contributor
rckstrscott
Posts: 2,659
Registered: ‎04-25-2011
0

Re: Pay in Full Vs Settle/ Pre Approval Mortgage Conditions


llecs wrote:

rckstrscott wrote:

The tag 'settled less that full balance' - 'paid in full' ect have no bearing on the score itself, they are merely tags... an underwriter however, might look at 'settled less than full' more negatively than paid in full... if your loan officer wants it paid in full, then he knows his underwriters and what they like to see.


FICO does score TLs with a settlement comment on par as a CO.


I am confused... a collection account with a tag line as "Settled for less than full amount' is scored differnt than "Paid in Full'? Really?

 

This has not been my experience at all... What is the basis of your understanding? I am not arguing because clearly I understand there are a lot of things I don't know, but having more than 20 collection accounts reporting, I did a varying degree of paying them off and my score didn't move in any direction at all in relation to the tag on the account. Paid, unpaid, settled or paid in full.

 

-scott

Starting FICO Score: 10/10: TU 498 | EQ: 502 Current FICO Score(lender pull): 05/12: TU: 722 | EQ: 712 | EX: 686
Collections Removed: Hunter Warfield, CBE Group, Merchants Credit Guide, EOS-CCA, Enhanced Recovery, Portfolio Recovery, UCB, American Collection Company, Medical Business Bureau, Jefferson Capital, Credit Portfolio Associates, FCO, LVNV, Convergent, Armor Systems
Other Negative Entries Removed:Plains Commerce CO, HSBC CO, 2008 Judgment Santander Reposession

Still Working On: Illinois Paid Tax Lien,
Positive Accounts:10/10: 0 | 07/12: 6 | Mortgage Closed 5/12, Macy's AMEX $3900, Citi/Home Depot $2000, Capital One Cash Rewards $1500, Capital One Secured $500, Credit One Bank $500. Total Utilization: 6%. AAoA: 1yr, 7mth. INQS: 8 TU, 8 EQ, 4 EX

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