01-25-2013 04:47 PM
Long time lurker and first time poster. I sincerely hope someone can help me. My situation is as follows: I have 6 separate student loans on all three CR's. They are all listed as negative accounts as they were defaulted, and then consolidated, NOT rehabbed. I know I made a mistake in doing this. However, in talking with Dept. of Ed, the rep gave me fax number to shoot over a request to remove and said they would do so, as there was no balance. These are the only negatives on two of the three credit bureaus. HOWEVER, they are also my longest trade lines. Would the improvement of removing 6 accounts that were negative, counterbalance the fact that my credit "age" would dramatically decrease? My oldest account would go from 1999 to 2009.
My wife and I are looking to buy a home and get preapproved in the next 5-6 months or so using FHA, so I REALLY would like to be careful. Thanks in advance for anyone's input.
P.S. If anyone knows if its mandatory to pay off a collection before closing an FHA loan as well, that would be helpful as well. Thanks again folks.
01-25-2013 08:50 PM
Unfortunately, the answer is that "it depends." Generally, lates have a much greater impact than your average age of accounts, BUT if the lates are old and the AAoA drops dramatically, you may not see much score gain, particularly if these are not your only negative accounts.
Since you are looking at a mortgage, I would go ahead and remove them. Your file will be looked over many times by real human beings, and you will have to answer questions about each negative account. In the meantime, I would not make things worse by opening any new accounts unless it is absolutely neccessary.
01-27-2013 06:15 AM
They more than likely will not be removed. DOE is firm in its policy of accurate reporting which mean you are left with a paid collection. However for FHA purposes, all they care about is that you DON"T have a loan in default. You will still qualify with the tradelines showing.
01-28-2013 10:46 AM
Thanks to both of you for your help. Now my quandary is a bit more confusing. Over the weekend, it seems as if my credit card payments were posted and my utilization dropped down after Christmas shopping. Now my midscore is 661. Trans Union-677, Equifax- 661, and Experian-595. The folks at the DOE literally told me that because it had zero balance and was sold through the consolidation that they would not have a problem removing it. I was surprised as well. I even called back and verified information, and apparently they do this quite often. However, seeing as how my mid score still is above 640, I am of the mindset to leave well enough alone. Thoughts? Thanks again for all of the help.
Also, I do have an active collection that is reporting only to Experian (hence the 595), but it is 5 years old. Is this something that will need to be paid before FHA is approved?