topic Re: CC charge off and getting a mortgage in General Credit Topics

CC charge off and getting a mortgage

Margaritapizza11 — Fri, 04 Mar 2022 01:50:32 GMT

Hello,

I have a charge off from 2019 for $1600 (unpaid) from Dscvr card. My credit is 680 and I have no collections and have made all overall payments for all accounts on time (over 70) since 2019. My overall utilization is very low. I am trying to get a mortgage by June and am wondering if this will hold me back? From research I've done and from what I've heard, it shouldn't make a huge impact on the decision but just thought I'd check here.

Note: There was a collection for this account that was removed from all 3 bureaus. Why would it be removed and this CO remain?

Re: CC charge off and getting a mortgage

thornback — Fri, 04 Mar 2022 01:47:12 GMT

@Margaritapizza11 wrote:

Note: There was a collection for this account that was removed from all 3 bureaus. Why would it be removed and this CO remain?

The collection could have been removed for a number of reasons. Discover is not known to sell their debts; they usually retain ownership and simply assign collection authority to a hired agency. If that authority is revoked, the agency would have to remove their collection tradeline from your reports. The collection tradeline has no bearing on the original tradeline reported by Disco.

Perhaps Disco is reassigning the debt to a different agency (who could at some point report their own collection tradeline); or maybe Disco is gearing up to file suit - do you know the statute of limitations (SOL) for debt collection in your state?

While the CO, in and of itself, may not prevent mortgage loan approval, personally, i would pay the debt prior to seeking a mortgage to prevent any surprises during the mortgage process that could ultimately hinder or otherwise complicate closing (such as updates on the CO which could drop scores, a new collection popping up, or - worst case - a lawsuit). That balance is also factoring into your overall util so paying it to zero would eliminate that additional use percentage.

Welcome to the forum.

Re: CC charge off and getting a mortgage

OmarGB9 — Fri, 04 Mar 2022 22:35:17 GMT

@thornback wrote:
@Margaritapizza11 wrote:

Note: There was a collection for this account that was removed from all 3 bureaus. Why would it be removed and this CO remain?
The collection could have been removed for a number of reasons. Discover is not known to sell their debts; they usually retain ownership and simply assign collection authority to a hired agency. If that authority is revoked, the agency would have to remove their collection tradeline from your reports. The collection tradeline has no bearing on the original tradeline reported by Disco.

Perhaps Disco is reassigning the debt to a different agency (who could at some point report their own collection tradeline); or maybe Disco is gearing up to file suit - do you know the statute of limitations (SOL) for debt collection in your state?

While the CO, in and of itself, may not prevent mortgage loan approval, personally, i would pay the debt prior to seeking a mortgage to prevent any surprises during the mortgage process that could ultimately hinder or otherwise complicate closing (such as updates on the CO which could drop scores, a new collection popping up, or - worst case - a lawsuit). That balance is also factoring into your overall util so paying it to zero would eliminate that additional use percentage.

Welcome to the forum.

Well said, @thornback. OP, I'd also suggest paying it, because many mortgage lenders will require you to clear up any outstanding delinquent debts anyway prior to even considering you for a mortgage.

Re: CC charge off and getting a mortgage

EAJuggalo — Sat, 05 Mar 2022 13:06:53 GMT

And some mortgage programs require that a certain time frame has passed since those debts have been paid. If Discover sees a HP on your report from a mortgage service they are much more likely to file suit or assign a collector quickly to be sure they either get paid or cause as much damage as they can to you.

Re: CC charge off and getting a mortgage

thornback — Sat, 05 Mar 2022 16:16:49 GMT

@EAJuggalo wrote:
And some mortgage programs require that a certain time frame has passed since those debts have been paid. If Discover sees a HP on your report from a mortgage service they are much more likely to file suit or assign a collector quickly to be sure they either get paid or cause as much damage as they can to you.

^^ Yes. This too.

Re: CC charge off and getting a mortgage

moto4man — Sun, 06 Mar 2022 13:37:04 GMT

@EAJuggalo wrote:
And some mortgage programs require that a certain time frame has passed since those debts have been paid. If Discover sees a HP on your report from a mortgage service they are much more likely to file suit or assign a collector quickly to be sure they either get paid or cause as much damage as they can to you.

Wow, that's pretty brutal. I had no idea! I mean, I do understand that it is ones responsibility to pay ones bills... but that is horrible.

Re: CC charge off and getting a mortgage

CreditCuriosity — Sun, 06 Mar 2022 14:25:53 GMT

@moto4man wrote:
@EAJuggalo wrote:
And some mortgage programs require that a certain time frame has passed since those debts have been paid. If Discover sees a HP on your report from a mortgage service they are much more likely to file suit or assign a collector quickly to be sure they either get paid or cause as much damage as they can to you.
Wow, that's pretty brutal. I had no idea! I mean, I do understand that it is ones responsibility to pay ones bills... but that is horrible.

Why is that brutal? That is their best time to collect on a debt as if a person can afford a house and down payment they can pay back a debt that they incurred and responsible for as that is a fairly trivial amount in this case as down payment and closing costs are certainly greater by a big amount than charged off amount. As echoed above most collection agencies look for a tri-merge pull and pounce it to get their money from a bad debt as they know they can stop the opportunity to get a house and likely to get paid. Most mortgage companies will certainly ask about it as well and make sure it is resolved first.

Re: CC charge off and getting a mortgage

CreditInspired — Mon, 07 Mar 2022 11:44:15 GMT

@moto4man wrote:
@EAJuggalo wrote:
And some mortgage programs require that a certain time frame has passed since those debts have been paid. If Discover sees a HP on your report from a mortgage service they are much more likely to file suit or assign a collector quickly to be sure they either get paid or cause as much damage as they can to you.
Wow, that's pretty brutal. I had no idea! I mean, I do understand that it is ones responsibility to pay ones bills... but that is horrible.

Why is it brutal? From a creditor's POV, if one can afford to take out a mortgage for hundreds of thousands of dollars, one can afford to pay off a couple of thousands on an owed debt.

Just my 2cents.

Re: CC charge off and getting a mortgage

CreditInspired — Mon, 07 Mar 2022 11:45:02 GMT

@CreditCuriosity wrote:
@moto4man wrote:
@EAJuggalo wrote:
And some mortgage programs require that a certain time frame has passed since those debts have been paid. If Discover sees a HP on your report from a mortgage service they are much more likely to file suit or assign a collector quickly to be sure they either get paid or cause as much damage as they can to you.
Wow, that's pretty brutal. I had no idea! I mean, I do understand that it is ones responsibility to pay ones bills... but that is horrible.
Why is that brutal? That is their best time to collect on a debt as if a person can afford a house and down payment they can pay back a debt that they incurred and responsible for as that is a fairly trivial amount in this case as down payment and closing costs are certainly greater by a big amount than charged off amount. As echoed above most collection agencies look for a tri-merge pull and pounce it to get their money from a bad debt as they know they can stop the opportunity to get a house and likely to get paid. Most mortgage companies will certainly ask about it as well and make sure it is resolved first.

+1000