Do i have to pay off a CC charge off from 3 years ago to qualify for an FHA loan?
Looking to buy a house but have this on my credit history. I have no problems paying it off but the debt has been sold and re sold to 3-4 different collectors now. What should I do?
Tags: charge, from, Loan, qualify, years
2011/09/08 at 22:28:46
Mortgage lenders will require that all derogatory items be settled before you can be approved for a mortgage. I saw something recently that at least some lenders require that derogatory items be settled at least 6 months ago.
Send a letter to whatever collection agency that is currently showing on your credit report. Ask that they validate the debt. When you receive the validation, you can then negotiate settlement. You can probably settle a 3 year old debt for 25% to 50%. Lump sum gets the best deals. Payment plans have to be short term.
Get any settlement agreement in writing and save it, along with your payment proof, forever. Do not give collectors direct access to your bank account.
2011/09/08 at 22:14:42
If you’re going to pay off old-charged-off debt, then you might as well negotiate the lowest settlement you can possibly get, being that the negative charge-off notation is going to stay for 7 years on your credit report anyway….regardless of whether or not the charge-off is paid in full. Per the Fair Credit Reporting Act, a charge-off, whether paid or not, can remain on a consumer’s credit reports for up to seven years.
You have to be very careful in this effort…Mail them a vaguely worded statement like:
I am willing to settle this matter for 25% of the original amount. This is in no way an admission of this debt, but rather an attempt to settle this matter. Your firm must send me a written agreement on your company’s letterhead that you will accept this amount as “payment in full” and that is issue will be settled. Upon receipt of this agreement, I will mail you a money order for this amount.
DO NOT tell the debt collector that you are trying to clear your credit to qualify for a new mortgage. If you do they will use this info against you to extort a maximum settlement.
Be advised that renewing contact with debt collectors like this can stir up trouble. A charge-off from 3 years ago would most likely be within the statute of limitations…meaning that they could take legal action if they find out that you now have money to pay. Be sure to word any settlement agreement as noted above…do not admit in writing to owing the debt unless you want them to take you to court and have your wages garnished.
Pay any settlement only via USPS money orders. Never give debt collectors your checking account numbers for payment.
2011/09/08 at 21:48:01
You should, however do NOT bother to pay it off, UNTIL the agency that holds the note agrees in writing, that they will report to all 3 credit bureaus that it was “satisfied in full”, if you pay it off.
If you don’t get that agreement, you could pay it off, and they still don’t have to report it as paid, or satisfied. Then you’d still be stuck, and there’s not a thing you can do to clear it up except dispute it with the bureau, and that takes more time that you probably have right now.
2011/09/08 at 21:09:20
Not good. I’d pay it off if I had the funds. It’ll still be on your credit report. You should get a letter from the collection agency stating that you paid it off. The mortgage company will look at it alittle more favorably if it’s paid off and you have a letter stating that.