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Want to obtain mortgage in 2-3 years, what do I do with my collection accounts?

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Want to obtain mortgage in 2-3 years, what do I do with my collection accounts?

Hey trusty group! I apologize in advice this may be long-winded, I just want to be thorough. I have been hanging around the rebuilding group for a while, but they said to come over here for this question. So my wife and I got married a month ago, and want to buy in 2-3 years. We are waiting because she is a new attorney and wants to pay down her student loans a bit first, to better help the DTI ratio (she has $170,000+ thanks to law school!) Anyhow, while her credit is decent, mine is not. Working on raising my score, but curious as to what I do with my collections accounts. Made some dumb mistakes in my younger years (I'm now 25). I understand some say to let them lie until you actually meet with a lender and see what they say, but I see that advice more so with people already in the process or sooner to be. My collections total $2600, and PFD has not been a possibility. Most creditors are flat out refusing multiple times, so please don't advise that. Just worried about paying them and making the date they appear as sooner, but also worried not paying makes it look like I'm not responsible.

Sorry for the long post, I trust your opinions though and look forward to your responses!
6 REPLIES 6
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Valued Contributor

Re: Want to obtain mortgage in 2-3 years, what do I do with my collection accounts?

2600, that's a small amount! PFD is very far and few so if it's a Year or two till mortgage , pay it and GW the heck out of it. It will update , but you have enough time that will take care of itself . Once it's paid they can not update so the sooner the better .
Message 2 of 7
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Re: Want to obtain mortgage in 2-3 years, what do I do with my collection accounts?

Thank you SBrooks for the prompt reply! What you say makes sense and while I'm currently a student and not making much (we live off her income basically), I will throw everything I have at my collections. Thank you for the advice!
Message 3 of 7
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Established Contributor

Re: Want to obtain mortgage in 2-3 years, what do I do with my collection accounts?

if you have time.. and it sounds like you do , research the NACA mortgage .. also on this board. there is NO better mortgage. It takes alot of work
but most all your money goes into the house, NOT banks and fees.

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Message 4 of 7
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Valued Member

Re: Want to obtain mortgage in 2-3 years, what do I do with my collection accounts?

Just to throw my 2 cents in there, with the way FICO scores work, I see no benefit in paying off those collections. Once you pay them, any leverage you had in getting them removed from your credit history goes out the window. They can't 'update' your report and reset the clock, that's the case in California anyway, I am not an expert but I would assume this would be similar in other states, otherwise collection agencies would be updating all the time up to and perhaps even beyond the SOL. You have their money in your hands, you have the upper hand now. If they will not PFD then they do not want it back bad enough yet.
Message 5 of 7
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Established Contributor

Re: Want to obtain mortgage in 2-3 years, what do I do with my collection accounts?

Before you do ANYTHING with those collections, do your research and find out when they're going to fall off your credit report. 

 

You said you made some mistakes when you were younger, and now you're 25. How many years ago was "younger?" And if you stick to your 2-3 year timeline for a mortgage, those derogatories may fall off your reports (they stay on for seven years) without you doing a thing. 

 

 

Message 6 of 7
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Frequent Contributor

Re: Want to obtain mortgage in 2-3 years, what do I do with my collection accounts?

I had 3k outstanding on a 4 yr old co and just went thru the mortgage process. It wasnt an issue and didnt even come up. Took a lot of courage to apply and felt ashamed of the past but if they are outside of the statute of limitations on your state ignore them. Save your money for closing costs and down payment in 2-3 yrs you'll be ready!

Also I came out of school with a heavy loan, first 5 yrs i threw everything at loans to the point I was going crazy with my budget. I slowed down, reduced payments and moved extra payment to down paymet. Will take a yr or two to make up on the back end of my loans but Ill gain more in tax wrote off and building equity. I'd say buy sooner rather than later even with a lot of student loan debt.
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