FHA loan new collection

[Anonymous]

We will be closing on a FHA loan in a week. We had a collection show up on credit report yesterday. It had been off for years and we completely forgot about. From what I understand they will do a soft pull the day of or right before closing. I know it will show up its about $300. Credit score dropped dramatically. Will it knock us out of closing on the home or will be good to go if we pay it off? A credit card showed up that we got a month before we applied for the but we aren't to to worried about that because we can prove it was well before the loan and the balance is only $20. Credit score dropped dramatically. It's so close to closing I would hate for a mistake made years ago to bite us in the butt now. Any advice on what to do, tell our loan officer or wait to see what happens? Should we just prepare ourselves to be told no?

[youdontkillmoney]

I'd pay it off immediately for the full amount to get it off your credit report.

[Anonymous]

It won't be off of the report in time for closing. We plan in paying it off we just don't know how to go about it.

[Anonymous]

Not much you can do at this point time wise as we are talking collections.  Paying it off won't drop it off the report either by standard FCRA rule.  

Aside from your mortgage situation, I would find out exactly what the debt is for by validating it with the collection agency; a simple "Please provide the detail of the account I'm seeing on my account" letter sent through certified mail.  Collection agency now has 30 days to dispute.

If they don't respond within 30 days, mail a copy of the certified letter & the date it was sent (proven with certfiied mail) and have each credit bureau take it off the report as it's now an invalid entry whether or not the report was accurate.  I would go from there.

If the debt is past SOL (depending on your state) obviously they can't sue you.  It may be easier to take it off the report if this is a medical collection as most of the time you can pay the hospital/clinic and avoid going through the collection agency then dispute it as invalid entry as your bill is now paid off through the original collector & not the collection agency.

[StartingOver10]

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@Anonymous wrote:
We will be closing on a FHA loan in a week. We had a collection show up on credit report yesterday. It had been off for years and we completely forgot about. From what I understand they will do a soft pull the day of or right before closing. I know it will show up its about $300. Credit score dropped dramatically. Will it knock us out of closing on the home or will be good to go if we pay it off? A credit card showed up that we got a month before we applied for the but we aren't to to worried about that because we can prove it was well before the loan and the balance is only $20. Credit score dropped dramatically. It's so close to closing I would hate for a mistake made years ago to bite us in the butt now. Any advice on what to do, tell our loan officer or wait to see what happens? Should we just prepare ourselves to be told no?

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Tell your LO.

He most likely will say to leave it alone but it is best to hear from him.

I don't think it is going to tank your loan at all....these things happen. You can show it was from years ago, right?

[Anonymous]

If we dug hard enough we probably could prove it occurred years ago. It is a AT&T phone bill we quit paying. It had been on our credit report before but I'm guessing when it got taken off for a while it had been sold to another collection agency and it has now reappeared at the worst possible time. I don't know if they'll count that as new or old since a new agency has it. I would love to contact our LO but Im afraid I'll set off red flags and sink the loan even faster.

[frugalQ]

Tell your LO. You do not want them to find out 2 days before closing.

[damnedanddetermined]

I agree with Frugal....tell your LO and maybe he can even do a rapid rescore if needed, I dunno