I am working with a mortgage lender and currently waiting on my Rapid Rescore results.
I'm hopeful that I will be approved.
A few months ago my car was totaled (not at fault). When I purchased the car I didn't think to get GAP insurance(at fault ) so I was left with a balance of about 6500 dollars.
The auto loan company offered a settlement that I could pay in 2 months time and the loan would show a $0 balance but a comment would be added indicating that I settled for less than originally owed (I don't have the exact verbiage to reference at the moment).
This means my car loan would go from Paid as Agreed to Settled for Less than Original Amount. I asked the mortgage lender and they think that the impact to my credit score would be insignificant.
I would love to hear your perspectives on the impact the comment could potentially have.
From my understanding this would report as a "Manner of Payment: 9" (which is the same as a charge-off see TransUnion's guide) and would report as a derog on your credit. So if it's not reporting as a derog account and you are concerned what it would do to your scores, I would not suggest you settle for less than the amount is owed. If it's already reporting as a charge-off then accepting the settlement shouldn't ding your credit any further.
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