Buying First Home & Accounts Past SOL - Advice Requested

[Spacecadet50]

I've been talking to a moderator here on the board, but would like to get additional input. I am currently renting, but looking to purchase my first home/condo. I live in Southern California and it will be just me. My scores are Experian/604; Transunion/565; Equifax/575 (per myfico score 2).

I am wanting to do a FHA loan and get assistance (free money) if possible. I have 3,000 setting to the side, but can't touch the little 401 in my account. In speaking with a couple lenders, the story is the same. Have to get score up to 620/640 to participate in assistance programs. There are 4 collection accounts that are really past SOL with 6 months to 1 1/2 years left. It was suggested that I pay these off, but I'd like to determine if there are other options.

What if I dispute the items? While it is going to take a few months for my score to go up, wouldn't disputing them create an issue with getting financed? What about sending validation letters?

Not sure what the lenders were looking at in regards to my credit reports. They didn't ask how old they (collections) were. It was presented as if they were current/within SOL.

 

[Goody_Ouchless]

It's a tough one. My mortgage guy had me write a letter explaining my negative entries. My first draft was all about SOL and the debt buying industry. He said to tear that up and talk about medical emergencies and taking care of aging parents. He said getting into the weeds of things like SOL just made it look like I was blaming lenders while trying to woo a lender.

[LaneBlane]

6 hours ago, Spacecadet50 said:

There are 4 collection accounts that are really past SOL with 6 months to 1 1/2 years left. It was suggested that I pay these off, but I'd like to determine if there are other options. 

What if I dispute the items? While it is going to take a few months for my score to go up, wouldn't disputing them create an issue with getting financed?

Approximately how much money is each collection account for?

If any of the collection accounts has a fairly small balance, perhaps you're in a position to make a settlement offer in exchange for having the tradeline removed.  If the account is well past the SOL, they can't take you to court.  (For them, it's better than getting nothing.)  You can start with a 20% offer in exchange to having the item removed from your credit reports.  Don't mention anything about why you need them removed.  They'll hold out for more if they know you want to purchase a home.

Someone with more experience in this area will need to advise you further on this.  Offering a settlement or making a payment can reset the SOL clock.  There's a certain way to do this that will prevent this from happening.

I don't believe disputing the accounts will create an issue with your getting financed.  The CRAs may add a statement to these collections that says the consumer disputes the account.  If the accounts are old, maybe at least one of them will drop after the first dispute is made.

I would recommend doing some research into the accounts to find out the date of your last payment on each.  This will allow you to determine when they will drop from your reports.  (7-years after the last payment was made.)  If any of the accounts are close to the 7-year mark, you may want to wait for them to drop on their own.

I've taken out two FHA loans in California around 20-years ago.  The process may have changed since then.  However, I do remember they required all collection accounts to be taken care of.  I had two collections on my report that I went ahead and paid in full because they weren't for very much.

 

[Spacecadet50]

2 hours ago, LaneBlane said:

Approximately how much money is each collection account for?

If any of the collection accounts has a fairly small balance, perhaps you're in a position to make a settlement offer in exchange for having the tradeline removed.  If the account is well past the SOL, they can't take you to court.  (For them, it's better than getting nothing.)  You can start with a 20% offer in exchange to having the item removed from your credit reports.  Don't mention anything about why you need them removed.  They'll hold out for more if they know you want to purchase a home.

Someone with more experience in this area will need to advise you further on this.  Offering a settlement or making a payment can reset the SOL clock.  There's a certain way to do this that will prevent this from happening.

I don't believe disputing the accounts will create an issue with your getting financed.  The CRAs may add a statement to these collections that says the consumer disputes the account.  If the accounts are old, maybe at least one of them will drop after the first dispute is made.

I would recommend doing some research into the accounts to find out the date of your last payment on each.  This will allow you to determine when they will drop from your reports.  (7-years after the last payment was made.)  If any of the accounts are close to the 7-year mark, you may want to wait for them to drop on their own.

I've taken out two FHA loans in California around 20-years ago.  The process may have changed since then.  However, I do remember they required all collection accounts to be taken care of.  I had two collections on my report that I went ahead and paid in full because they weren't for very much.

 

One account is 2860(2011), $600(2012), $315(2012), $899(wrong amount - they added late fees 2012)

[LaneBlane]

31 minutes ago, Spacecadet50 said:

One account is 2860(2011), $600(2012), $315(2012), $899(wrong amount - they added late fees 2012)

If your last payment on the account that's $2,800 was made in 2011, I would allow this one to drop on it's own.  If you know which month your last payment was made in 2011, I would send a letter to the CRAs one month prior and request that the account be deleted for age on or before that date.  If you don't have a recent credit report number, you may have to dispute electronically.  (Is the creditor reporting an accurate last date of activity?)

The other three accounts are relatively small.  If you add these together, it's $1,814.  If you were able to settle for 20%, this would be $362.80.  Even if the creditors countered at 40%, you're still only taking about $725.60.

This is all based on what I would do if I were in your position.  Also, as I mentioned, there is a certain way you need to go about making offers in order to prevent the SOL clock from resetting.  Someone else will need to advise you on this, as well as how to obtain confirmation in writing that the creditors will remove the tradeline in exchange for the settlement payment.

 

[Harry Seaward]

21 hours ago, LaneBlane said:

You can start with a 20% offer in exchange to having the item removed from your credit reports.

They almost never delete for payment in full; they certainly won't for less than that.

21 hours ago, LaneBlane said:

Don't mention anything about why you need them removed.  They'll hold out for more if they know you want to purchase a home.

You don't need to mention it and you'll look like a tool if you try to act like you have no specific reason.  There's only one reason a consumer wants a debt removed from their credit report.

[LaneBlane]

2 hours ago, Harry Seaward said:

They almost never delete for payment in full; they certainly won't for less than that.

What if an account is well past the SOL?   They can't sue you for it.  Wouldn't they rather get something instead of nothing?

 

2 hours ago, Harry Seaward said:

You don't need to mention it and you'll look like a tool if you try to act like you have no specific reason.  There's only one reason a consumer wants a debt removed from their credit report.

What if you said you wanted to raise your credit score because you need to start looking for a new job?   It's a specific reason and would be much better than wanting to purchase a car or a house/condo.

[WhoCares1000]

7 hours ago, LaneBlane said:

What if an account is well past the SOL?   They can't sue you for it.  Wouldn't they rather get something instead of nothing?

 

What if you said you wanted to raise your credit score because you need to start looking for a new job?   It's a specific reason and would be much better than wanting to purchase a car or a house/condo.

The problem is that all they will hear is that you want to raise your credit score. That is enough reason for them to play hardball.

Personally, I would just wait the 2 years needed for those entries to drop off and in the meantime, since you can easily swat them if they tried to sue you in court, play games with them and see if they are willing to violate the law. Don't call them, let them call you. You might then have leverage in court to get the tradeline removed.

[BackFromTheDebt]

My own personal experience, getting a home refi late last year --

We had a disputed item on my wife's credit report, between $600-$700, just before the SOL.  There was no way in Hades they could possible collect the money.  We offered to pay every penny for a PFD to get it off our credit report, and mentioned if they didn't agree they wouldn't get a penny.

They didn't even bother to reply.  

[Spacecadet50]

4 hours ago, BackFromTheDebt said:

My own personal experience, getting a home refi late last year --

We had a disputed item on my wife's credit report, between $600-$700, just before the SOL.  There was no way in Hades they could possible collect the money.  We offered to pay every penny for a PFD to get it off our credit report, and mentioned if they didn't agree they wouldn't get a penny.

They didn't even bother to reply.  

Did they remove it?

[BackFromTheDebt]

50 minutes ago, Spacecadet50 said:

Did they remove it?

No.   By now it is past the SOL.  I am not sure if this is still on the credit report or not.  

[Harry Seaward]

19 hours ago, LaneBlane said:

Wouldn't they rather get something instead of nothing?

 You would think, but apparently not. They would rather be vindictive a-holes.

19 hours ago, LaneBlane said:

What if you said you wanted to raise your credit score

This the "one reason" I was talking about. They have 100% of the negotiating leverage.