RockyRoad

Removing a collection. Thoughts.

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I have a collection for $3210 from LVNV Funding.  I am a few points away from being pre-approved for a mortgage.  I believe if the collection is removed it will boost me to a pre-approved score.  I want to offer LVNV $1000 in settlement and to remove the collection account.  Anyone know how likely they are to remove the account under these terms?

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Not at all for less than 1/3 of the amount owed.  If you paid them in full, you *might* get them to remove it, but still not likely.  What is your FICO score now (actual FICO, not what credit karma or whatever shows you)?  How old is the LVNV collection?  Do you have any active credit card debt?  If so, what are your limits and how much of a balance is reported?  Are you trying for an FHA mortgage?  How much are you putting down?

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6 hours ago, RockyRoad said:

Anyone know how likely they are to remove the account under these terms?

Slim to none.  The major JDBs have a hard line policy against pay for delete.  The other major problem is that if you pre-applied for that mortgage they likely know about it and know you may not get approved unless you deal with them.  That shifts the leverage to their side and they will refuse to settle for less than the full amount.

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On 4/28/2018 at 3:54 PM, Harry Seaward said:

Not at all for less than 1/3 of the amount owed.  If you paid them in full, you *might* get them to remove it, but still not likely.  What is your FICO score now (actual FICO, not what credit karma or whatever shows you)?  How old is the LVNV collection?  Do you have any active credit card debt?  If so, what are your limits and how much of a balance is reported?  Are you trying for an FHA mortgage?  How much are you putting down?

My FICO is 567.  Equifax shows an open date of June 1, 2017 and lists LVNV Funding & TransUnion shows and open date of June 16, 2017 listing Capital One for the same debt.  I have two charged off credit cards that Im in the process of paying off with their law firms, one for $1821 ($1500 limit) & the other for $4321 ($3900 limit).  I would be applying for FHA with 3.5% down.

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Minimum FICO for an FHA is 500, but it looks like not too many lenders will go that low.  580 seems to be the sweet spot where most lenders will approve nearly everyone that has that or higher.

The problem with chargeoffs is the balances owed do not matter once the accounts are closed/charged off.  They have the same impact whether you owe 150% or 0%.  The only thing that helps these have less impact on your score is time since last update.  As long as these are being updated monthly, they are constantly being scored as 'fresh' chargeoffs.

Based on your response, it doesn't appear you have any active credit cards.  I would try to open a Cap1 starter card with a $300 limit.  If you aren't approved for that, find a local credit union and see about opening a secured card which is where you put $500 (or whatever) into a savings account and that is used as your 'collateral' to set your credit limit.  Which ever route you go here, use it once and then pay it off right away so that it will show up on your reports faster.  From then on don't use more than $30-$50 without paying it off.  This will make your utilization less than 10% which is ideal for FICO scores and in 3-4 months will probably get you the 13 points you need to get the mortgage.

As for the LVNV account, I wouldn't bother with trying to get it permanently gone.  There is one trick you can use.  Sometimes when you dispute an item with a CRA, the item will temporarily be removed (or hidden) from your credit reports while the dispute is active.  This is a one shot deal, meaning before you do it, you have to have everything else ready to go (house picked out, down payment ready to go, etc).  When we got our last mortgage, we had opened 3 credit cards that had not yet shown up on our reports when our lender pulled our pre-qual report.  I told him what was going on and that our score would be lower if he pulled again.  He said that if we could close within 90 days they could get us approved based on the original report and wouldn't have to pull again.  So that's what we did - we found a house and closed in 83 days.  In your case, I would tell your lender that you can probably get the collection to go away but only temporary and see if they can use a pre-qual report to close on.  If so, you would want to have everything set up and have the new credit card reporting for 3 or 4 months before you dispute the LVNV account with the bureaus.  Dispute it and wait a week or so for it to go away (MyPrivacyMatters.com allows daily credit pulls), then have your lender pull your report again.  You might even break into 600 FICO territory if everything works just right.

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On 4/28/2018 at 2:08 PM, Clydesmom said:

Slim to none.  The major JDBs have a hard line policy against pay for delete.  The other major problem is that if you pre-applied for that mortgage they likely know about it and know you may not get approved unless you deal with them.  That shifts the leverage to their side and they will refuse to settle for less than the full amount.

This reflects what I have seen.  I had a case where we offered a JDB a PFD for an account in my wife's name, and this was getting close to SOL.  The letter plainly stated that we would pay 100% for a delete, or pay nothing.

No reply.  

It is past SOL now.  We were able to get our mortgage anyway.  The credit score difference between paying it off and not paying it off wasn't big enough to make it worth our while to pay them.  

So, quite seriously, they preferred to collect 0% on a debt with no PFD rather than 100% on a debt with a PFD.  Go figure.  

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3 hours ago, BackFromTheDebt said:

So, quite seriously, they preferred to collect 0% on a debt with no PFD rather than 100% on a debt with a PFD.  Go figure.

Yeah, this is one area of the debt collection industry that seems to be happening purely for vindictive purposes.  I get not deleting on less than 100%, but if not to "teach a lesson", why insist the derogatory info stay once you get all of your money?

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21 hours ago, Harry Seaward said:

Yeah, this is one area of the debt collection industry that seems to be happening purely for vindictive purposes.  I get not deleting on less than 100%, but if not to "teach a lesson", why insist the derogatory info stay once you get all of your money?

What are the terms in the major CRA contracts that furnishers must adhere to in order to report? It may violate the terms of the contract to remove accurate negative information.  

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On 4/30/2018 at 12:33 PM, Harry Seaward said:

Minimum FICO for an FHA is 500, but it looks like not too many lenders will go that low.  580 seems to be the sweet spot where most lenders will approve nearly everyone that has that or higher.

The problem with chargeoffs is the balances owed do not matter once the accounts are closed/charged off.  They have the same impact whether you owe 150% or 0%.  The only thing that helps these have less impact on your score is time since last update.  As long as these are being updated monthly, they are constantly being scored as 'fresh' chargeoffs.

Based on your response, it doesn't appear you have any active credit cards.  I would try to open a Cap1 starter card with a $300 limit.  If you aren't approved for that, find a local credit union and see about opening a secured card which is where you put $500 (or whatever) into a savings account and that is used as your 'collateral' to set your credit limit.  Which ever route you go here, use it once and then pay it off right away so that it will show up on your reports faster.  From then on don't use more than $30-$50 without paying it off.  This will make your utilization less than 10% which is ideal for FICO scores and in 3-4 months will probably get you the 13 points you need to get the mortgage.

As for the LVNV account, I wouldn't bother with trying to get it permanently gone.  There is one trick you can use.  Sometimes when you dispute an item with a CRA, the item will temporarily be removed (or hidden) from your credit reports while the dispute is active.  This is a one shot deal, meaning before you do it, you have to have everything else ready to go (house picked out, down payment ready to go, etc).  When we got our last mortgage, we had opened 3 credit cards that had not yet shown up on our reports when our lender pulled our pre-qual report.  I told him what was going on and that our score would be lower if he pulled again.  He said that if we could close within 90 days they could get us approved based on the original report and wouldn't have to pull again.  So that's what we did - we found a house and closed in 83 days.  In your case, I would tell your lender that you can probably get the collection to go away but only temporary and see if they can use a pre-qual report to close on.  If so, you would want to have everything set up and have the new credit card reporting for 3 or 4 months before you dispute the LVNV account with the bureaus.  Dispute it and wait a week or so for it to go away (MyPrivacyMatters.com allows daily credit pulls), then have your lender pull your report again.  You might even break into 600 FICO territory if everything works just right.

Thanks for your insight and experience.  I signed up with a credit repair company that will probably dispute the LVNV account within the month.  If I get credits cards now and have them report for 4 months could I dispute again after the 4 months and it “disappear temporarily again?

Also, regarding credit accounts.  I’ve heard to increase your score to good/great status long term you need 11 plus accounts with low utilization.  Would it be wise to open say 5-6 credit cards now, take the inquiry hit, and have them report for the 4 months then apply for the FHA?  Would the inquiries be fatal to my pre-approval?

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2 hours ago, RockyRoad said:

If I get credits cards now and have them report for 4 months could I dispute again after the 4 months and it “disappear temporarily again?

 Probably not. The second dispute will most likely be viewed as frivolous.

2 hours ago, RockyRoad said:

Also, regarding credit accounts.  I’ve heard to increase your score to good/great status long term you need 11 plus accounts with low utilization.  

The number of accounts isn't  necessarily important. It's the variety of the types of accounts. Revolving, installment, real estate, auto loan, credit cards, store cards, etc. My daughter has a 1 year old auto loan and I made her an authorized user on two of my fairly recently opened credit cards that have <10% utilization. With just these three accounts in good standing she has a 680 FICO. 

2 hours ago, RockyRoad said:

Would it be wise to open say 5-6 credit cards now, take the inquiry hit, and have them report for the 4 months then apply for the FHA?  Would the inquiries be fatal to my pre-approval?

FICO scores multiple inquires of the same type in a short period (45 days, I think) as a single inquiry. I know this is the case for auto loan and mortgage inquires. I'm fairly certain it's also true for credit cards, but not 100% positive. Having said that, the several inquiries still show up on your report and a mortgage lender could independently view it as 'risky'.

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