What is the best way to settle an account with minimal damage??

[buyhouse36]

We were preapproved for a mortgage and our file is going to UW today. Our LO said we must payoff an AMEX account that is in an in-house collection dept.  Our original balance was $4k that is now down to $1500. They will settle for $1000 now. What is the best way to do so with minimal damage to scores???  It seems PFD would not work because we have been paying on it.

[Anonymous]

If you are already preapproved, then I would assume the LO has already pulled your credit scores?  The UW normally tells you (throught the LO) when you have to pay off the collections.  I would not pay it off until you get the go-ahead from your LO.  Some ask you to do it now, others let you wait until closing.  Given that you have been paying on the account and have gotten your balance down by almost 1/3 of the original amount, I would go ahead and ask for the PFD (get it in writing, of course).  There's no harm in asking, and the worst that can happen is that they say "no."  The collection department is not required to report anything to the CRAs, so I don't think the fact that you've been paying on it prevents a PFD.  You would think that would actually help!  Good luck!

[buyhouse36]

2 more questions...

1. What should the PFD say??

2. Who should I send it to?? NCO or Amex???

[Jazzzy]

---

@buyhouse36 wrote:

2 more questions...

1. What should the PFD say?? Remember that with a PFD, you are asking them to remove this from your CRs as a favor to you. When you write, point out that you have been paying this balance down and are attempting to buy a home. Be nice and be humble. Sometimes these letters work.

2. Who should I send it to?? NCO or Amex??? Who have you been paying? Are both accounts on your reports?

---

Remember to ask your LO if it is OK to have this paid at closing. Sometimes paying these off can lower your scores, and you don't want a lower score before closing.