dealing with a collection to get a mortgage

[Anonymous]

I have been trying to rebuild my credit and finding it slow going. I want to buy a house that is $305,000. I have a 10% downpayment. I have one delinquency on my credit report, a Discover chargeoff from 02/2009. I have money to settle it--the CA is asking $2500. 

I spoke to a mortgage broker and she ran my credit and my score came back as 641 which barely qualifies, but it qualifies. I said that I would pay the chargeoff and she said not so fast--if I do it wrong I could re-age the the debt and bring my score down. I was thinking about a PFD but she said those never work. (I am skeptical). 

What should I do? Is the PFD a bad idea? What pitfalls should I be aware of? How long does a PFD take? 

[guiness56]

I don't know what is meant by re-aging in her eyes.

Re-aging comes from changing the DoFD which can't be done legally.  And paying a CO won't change that.

Who is reporting the CO, the OC, CA or both?

YMMV on PFDs.

[Anonymous]

It's on my credit report under the original creditor, Discover card. I'm happy to pay what they're asking; I can go down and wire it to them right now. I just don't want to do the wrong thing and mess up my score. If it wasn't for my score, I would not worry about the PFD because if they don't re-age it, it's four years old now and if it's paid that should all be to the good, right? 

[guiness56]

Is Discover reporting a balance due and a CL?

[RobertEG]

PFDs, if one runs the normal gammit of sending snail-mail offers, is a bit time consuming.  First the back and forth in the mails, then after any agreement, time to process and report to the CRA.

With time apparently of the essence, I would suggest picking up the phone and using a personal contact, which will most likely give you a qucik read on how adamant they may be in not accepting PFDs.

Just be careful not to admit to owing the debt.  Difficult or not, you can only try.

One possible peril is that if the debt is still within SOL, your offer may generate an account review that could lead to their decision to commence legal action.

How strenuously have they been pursuing the debt, and is it still within SOL?

As another secondary issue, you state that the only negative is a charge-off, and yet you are dealing with a debt collector.

Is a debt collector also reporting?  Does the OC still own the debt?  If not, you cant pay them, PFD or otherwise.

[Anonymous]

Yes. It's listed on my Experian report as "Closed, failed to pay" with an original balance of $4000 and interest of $3500. Van Ru says they own it (I assume I can verify that by calling Discover, right?) and will accept $2500 to settle it. 

[RobertEG]

If you pay the debt collector, regardless of who still owns the debt, they cannot delete the reporting done by the OC.

[Anonymous]

---

Last month was the first I've heard from anyone about this chargeoff. Van Ru sent me a letter and said they were collecting for Discover and they'd accept $2500 to accept it. Van Ru is not reporting. Except for a paid tax lien from 2003, this is the only negative on my report. 

[Anonymous]

Can I call Discover and offer it to them? As I said, I don't mind paying it (life is much better now, and I have savings, thank God) but I have read terrible things about dealing with Discover and I'm a little scared. 

[RobertEG]

If they are "collecting for the OC," that is an indication that they have not purchased the debt, which permits the OC to still accept payment.

The delay in reporting the CO is not a violation, as the issue with reporting is that it not knowingly be inaccurate.  The FCRA places no requirement that reporting be made at the time of occurence of the adverse item.