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Is this a catch 22?


rodeogal
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OK...I am trying to clean up our credit reports to improve our scores for a home loan. From reading here I understand that a mortgage company will not close on a loan with outstanding collection accounts. However, if I pay these accounts now won't my scores take a huge hit because of recent activity on these already negative accounts?

If that is the case, how long before my scores start to improve again? I was hoping to buy a house before I am totally old and ugly...lol

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You kind of need to work with a mortgage broker to get it all straight...but...

First, you're talking about different scores. Paying collection accounts will indeed damage your FICO Bank Card score (the "sucker" score). The damage will disapate with age. Paying outstanding unsecured debts (CAs) will not hurt your FICO Mortgage score quite so much. Mortgage underwriters are more interested in making sure that all your unsecured obligations that may come back to lien against your property are taken care of...rather than worrying about "scores"...although you may take a hit on interest rate or PMI.

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You are correct, you accounts with CA's will be "conditioned" to be paid off weather or not they are past the SOL in your state, although, once past the SOL they can't order a lien, judgement or garnishment.

Nip those Ca's in the bud NOW, start off with DV's, some of them will drop like flies if they are OLD, if they are OLD your score will take a little sting because of the age, what this will do is let you know if the debt has been sold to another CA which I can almost bet you is waiting in the wings to pop up on your reports once you start the application process because they KNOW it will be conditioned to be paid off before you can close thus nabbing YOU by the short hairs because youwon't be able to negotiate with them and they know you will be RUSHED to get it taken care of and suckering you into paying the full amount thus giving them a 1000% profit on a debt they only paid pennies on the dollar for, that is how they stay in business.

If they are conditioned, settling the debt ofr less then owed will not work, the remainder of the debt can be sold to another CA. UNLESS when you are granted a PFD you make it clear in your letter that they are not to resell the rest of the debt to ANYONE.

BTW if you re planning on buying anytime soon DO NOT open any new accounts, lenders don't like new accounts, there is no payment history to them and it will drop your scores a bit and will take 1-2-3 months for it to recoup.

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