Collection a week before close

[Anonymous]

I have (had) a 700 going into a mortgage closing next friday.  Bank pulled my credit a couple weeks ago and gave me a commitment letter and today were asking for "final" info such as current account balances, etc. to make sure my earnest money cleared.

ALSO today literally while I was talking with the bank... I got an alert from experian.  Some collection agency added a new derogatory account to my report for $ 500.  Oh my god it feels like they did this on purpose.  This was an account previously with another collection agency that I had disputed.  It was removed from my report months ago but now its back with a new company.

I freaked out then did research on here and it seems this happens quite a bit.  I've called the original creditor (cell phone company) and just paid them the full amount.  Got an email receipt # from them and confirmation #.  Then I called this collection company's complaint department and told him this was paid with the creditor, gave them the confirmation #.  They say it will be removed from my report but it may take up to two weeks.

This sucks. How screwed am I at this point?  The bank I'm pretty sure has no idea this has happened yet and I believe they are doing the underwriting step right now.  I've seen mixed feedback on here about if that is even a good idea to tell them or not.  I suppose there is a chance it will be removed before they even check my credit again.  Maybe...

I have the receipt for paying the amount off.  That is enough to get me out of hot water with the bank right?  If they even discover this crap.

[Anonymous]

You should be fine.  Lenders use the credit report they first pull when you applied.  The second credit check they do right before closing is a soft check to ensure you didn't open any new lines of credit or had severe impact to your DTI. 

Its best to talk to your LO and be upfront and honest.  They are your partner in this and want it to succeed just as much as you.

[Anonymous]

You are right that these collections right before closing are no coincidence. Collection companies monitor, and when they see inquiries for mortgage on your report it tips them off. They know hitting your report right during the mortgage process is major leverage to get the debt settled fast.

Glad you were able to resolve it and hopefully it gets removed quickly. For anyone else finding themselves in this position, make sure to get the PFD agreement IN WRITING prior to paying the collection.

[Anonymous]

Thanks that makes sense.  Maybe you are right I should call him and give him a heads up Monday.  If they do soft check me thursday/friday and start raising red flags maybe he can straighten it out quickly since he already knows what's going on.

[Anonymous]

Update for anyone that finds themselves in a similar situation. mdillon8 was right it seems!  I'm clear to close.

[randomguy1]

---

@Anonymous wrote:

Update for anyone that finds themselves in a similar situation. mdillon8 was right it seems!  I'm clear to close.

---

Congrats! What a relief.

[boomhower]

Certainly a thing.  House I am currently under contract had a similar issue. Buyer was pre approved and everything looked good. Very shortly before closing and medical bill was put on her report.  I have no clue the nature or validity of bill but it cost her the home. Collections absolutely look for those seeking mortgages.  

[SusieQ954]

I would think if a collection appeared right before closing that other buyer would have found whatever means she could to pay it off to not jeopardize the purchase loan. I don't personally have any medical collections but I often read on these boards about people who have them and most seem to be a couple thousand dollars or less and most often less than a thousand . I would hope most of us have enough of a cushion in our savings/available funds that we could weather such a surprise and pay it off to salvage the deal. That is, assuming the collection doesn't yank our score below the required minimum.