Trying to get a new mortgage should I settle my debt

[Ne12007]

I applied at Wells Fargo for a new mortgage they say I need a 640 on 2 of the three agencies. And I had to settle a few old cc balances that were on my report. What is the best way to do so.my current score is 600 across the board. I am not trying to waste any of my hard earned money I have about 12k in delinquent balances.thx in advance for any help.also they said if I settle those balances that my credit will go up.

 

[Giants83]

You have to just what they said. No bank will give you a loan if you have outstanding balances. Are these in collections ? If they are I'd research collection agencies and offer them a settlement. These collection agencies often buy your debt for pennies on the dollar leaving you wiggle room to negotiate. For example if they say you owe $10,000 offer something really low like $2,000 cash. That's just an example. Another thing is get everything in writing and clarify that you want it removed from your report.
I'd also wouldn't rush it. The higher your score , the less interest you pay. 6 years ago I started cleaning up the mess I created. I had 12 accounts in collections. 12!! I started negotiating and paying them off. At that time my score was so bad I didn't even have a score. Today I have a 713. To improve your credit, do some research and take the advice of a lot of guys here who have been there. I just bought my first home. I got a great rate. This is something I thought I'd never achieve but here I am but I had to take responsibility for my debts and start to take care of them. Good luck!!

 

[Ne12007]

Ok so yes they are in collections so I have to get it in writing and negotiate.what is a common percentage they will negotiate at

 

[tri-terror]

I would talk to a different mortgage person... If you have JUDGEMENTS then yes they need to be paid. Items in collections typically NO. In fact paying them often results in your score going DOWN. They appear on your report still but as paid. Lenders look at this as an acknowledgement of the debt. I've been told this by several lenders, I didn't make it up.

The best thing you can do is continue paying your bills on time, that is the number one factor into your score. If you have current balances on credit cards, get them to less than 50% of your limit. You can also look into some of the credit repair agencies. They do work if you choose the right one. Now, they are not going to do anything that you couldn't do yourself but they are very good at it. They can get some of those delinquent accounts removed from collections and deleted.

Don't go to another bank. Find an independent realtor thru the grapevine and have him or her suggest a mortgage company and go talk to them. You can get to 640 from 600 pretty easy. 6-12 months I would think.

 

[Giants83]

I would talk to a different mortgage person... If you have JUDGEMENTS then yes they need to be paid. Items in collections typically NO. In fact paying them often results in your score going DOWN. They appear on your report still but as paid. Lenders look at this as an acknowledgement of the debt. I've been told this by several lenders, I didn't make it up.



The best thing you can do is continue paying your bills on time, that is the number one factor into your score. If you have current balances on credit cards, get them to less than 50% of your limit. You can also look into some of the credit repair agencies. They do work if you choose the right one. Now, they are not going to do anything that you couldn't do yourself but they are very good at it. They can get some of those delinquent accounts removed from collections and deleted.



Don't go to another bank. Find an independent realtor thru the grapevine and have him or her suggest a mortgage company and go talk to them. You can get to 640 from 600 pretty easy. 6-12 months I would think.

That is true if you make payments. It makes the debts current again and your score will go down. That's why you settle and pay them off at once with the understanding they will be removed. I had every one of them removed except for one and my score went up substantially. The only thing it couldn't fix was lack of revolving accounts.

 

[Giants83]

Ok so yes they are in collections so I have to get it in writing and negotiate.what is a common percentage they will negotiate at

You could challenge them first. Make the prove you own the debt. Maybe by some way someone screwed up and they no longer have the proof you own the debt. After all it's not the original company and its happened before. What I did after that was call one of the companies. The one I'll use for example was a $2300 account in collections. I went in know they paid at most 5 cents per dollar for that debt. I told them that I knew that and that I was either going to make an offer and pay it or say screw it and file bankruptcy then nobody would get anything. My first offer was $800 and they countered with $1100. I told them I have $1000 and that's what we settled on. I agreed to pay $1000 to satisfy the debt and have it REMOVED from my report. Not paid but removed. From that point on I wanted what we discussed in writing before I sent a certified check. I continued to do the same with the other 11. This is my experience. I really suggest you google about how to deal with collection agencies and how to raise your score. The info really helped me moving forward. Then when you think you're ready to move forward on a house is contact a mortgage broker instead of going to each bank on your own. Even though my score was decent I still went with one and am so happy I did. His relationship with certain banks got me in with one that fit my needs perfectly and he got his money from the bank and my closing cost were so little. Anyway I hope my experience helped but please do some research and arm yourself with knowledge moving forward. Also don't forget that after 7 years the debts come off your report.

 

[Paranoid Fitness]

I used to be a debt negotiator.
Basically, customers would have me negotiate with their unsecured creditors for lower payoffs. It only worked after six months of delinquencies because at that point the debts cease being an asset to the creditor and actually become a liability.

When a debt is settled it will show on your credit report as "settled in full. paid as agreed" or "SIF."

When a potential lender sees SIF on a credit report they know that the applicant did not pay the full amount and it can be detrimental to the process (regardless of credit score).

In fact, debt settlement can lower a credit score initially.

If you are 12-18 months delinquent on those accounts then SIF entries on your credit report should start to raise your score within 90 days of each settlement.

If your lender is telling you to settle maybe they are willing to overlook the fact that you did not live up to your original agreement with your creditors.

Here is a link to the FTC website explaining debt settlement:

Settling Credit Card Debt | Consumer Information

 

[Giants83]

I used to be a debt negotiator.

Basically, customers would have me negotiate with their unsecured creditors for lower payoffs. It only worked after six months of delinquencies because at that point the debts cease being an asset to the creditor and actually become a liability.



When a debt is settled it will show on your credit report as "settled in full. paid as agreed" or "SIF."



When a potential lender sees SIF on a credit report they know that the applicant did not pay the full amount and it can be detrimental to the process (regardless of credit score).



In fact, debt settlement can lower a credit score initially.



If you are 12-18 months delinquent on those accounts then SIF entries on your credit report should start to raise your score within 90 days of each settlement.



If your lender is telling you to settle maybe they are willing to overlook the fact that you did not live up to your original agreement with your creditors.



Here is a link to the FTC website explaining debt settlement:



Settling Credit Card Debt | Consumer Information

Zero of my past accounts are on my credit report. After settling they were removed. They did not say SIF. It's as if they have never existed with the exception of medical. I could not settle my medical and couldn't have it removed and it's still there today.

 

[Giants83]

Oh yeah and my tax lien is still there even though it's paid. Collection agencies are not required to remove the debt after you settle but it doesn't hurt to push for it. Like I said above this is my personal experience and I didn't succeed in getting them all removed. But 2 is better than 12. Do your homework on Google. You'll learn a lot and be able to do the footwork yourself. Best piece of advice, when you get this cleared up then avoid ever letting it happen again.

 

[Deleted member 121863]

How about finish waiting the 7 years till they fall over, save your cash, score will go up, and don`t buy a house in a currently over inflated market. Plus if your not 700 FICO your not getting a great rate. The plan all along by the federal reserve has been to keep rates artificially low, buy up bad debt from banks to keep them solvent and get the housing party going again. Basically make the tide rise, lifting home values from being under water and solve the last housing bubble with more cheap debt to re-inflate it.

 

[Paranoid Fitness]

Oh yeah and my tax lien is still there even though it's paid. Collection agencies are not required to remove the debt after you settle but it doesn't hurt to push for it. Like I said above this is my personal experience and I didn't succeed in getting them all removed. But 2 is better than 12. Do your homework on Google. You'll learn a lot and be able to do the footwork yourself. Best piece of advice, when you get this cleared up then avoid ever letting it happen again.

Collection agencies are required to update your credit report if the debt is paid. They are not required and will not remove if the debt is still owed.

Basically, if you've paid and it still shows on your report it is an error. As long as you can prove it's an error the must remove it.

You have to fight them on sometimes but they most certainly are required, by law, to update paid accounts and remove errors.

How Do I Get Collections Removed From My Credit Reports? - Credit Sesame

Often what happens is multiple collection agencies showing the same debt because it was sold from one to another. You pay the final one but the others still show the same debt...they are required to remove it from your report as long as you can show you paid it.

As far as the debt falling off...
7 years is not quite accurate...

It is actually 7 years plus 180 days from last delinquency (because it takes six months to become a liability to the debt holder).

If you owe someone and are delinquent and never pay another cent it goes from the first delinquency. If you pay them a little here and there it will go from the delinquency after last payment made.

Re-Aging a credit account on credit reports is illegal ? RebuildCreditScores.com

 

[wargam19700]

How about finish waiting the 7 years till they fall over, save your cash, score will go up, and don`t buy a house in a currently over inflated market. Plus if your not 700 FICO your not getting a great rate. The plan all along by the federal reserve has been to keep rates artificially low, buy up bad debt from banks to keep them solvent and get the housing party going again. Basically make the tide rise, lifting home values from being under water and solve the last housing bubble with more cheap debt to re-inflate it.

I agree 100% with this. Don't give the shit vultures a fckn cent. They prey on weak people calling and harassing so they can get their 1000% mark up. If you pay them without a signed written notarized form saying they will remove the debt completely from your record it stays on there for the same time period but marked as paid. If you have shit credit don't buy anything and wait it out. Pay for everything in cash so you don't drown in debt and keep the shit system floating along.

 

[ronnieron]

Paying old deliquent debts will not raise your score, the bad marks must be removed. If your at 600 now, getting 2 of them removed should put you at 640+. Also with fha, you can have unpaid debt and still be approved. Although if your report says monthly payment amounts due for those debts, they will count that against your debt to income ratio, which i believe they let you go up to 40%. Focus on settling and getting removed your most recent delinquent accounta first, the more recent the more they pull your score down. The amount delinquent does not matter as far as score goes.

 

[04lsxmustang]

don't settle for a deal it will be on your report as settled for lees than owed.
also call Lexington law firm and the can help remove bad items. 3 guys at work done it and has worked like a charm

 

[ronnieron]

don't settle for a deal it will be on your report as settled for lees than owed.
also call Lexington law firm and the can help remove bad items. 3 guys at work done it and has worked like a charm

You can do this yourself. You settle for a removal of the negative tradeline. You must get a removal letter agreement signed by the company reporting the negative tradeline on your report. In past i have also had the company include that the remaining debt will not be sold to another junk debt buyer. Before paying anything i would also make the company validate that they actually owe the debt. Many of these debt collection companies will pick up old debts via skip tracer software, debts that have been written off past companies books. Always make sure you validate any debt, which can easily be done by disputing with the credit reporting agency. Once you dispute, the debt company must provide the agency proper validation within 30 days or the negative is removed. You can read all about this on creditboards. Its a forum that explains everyrhing

 

[Giants83]

don't settle for a deal it will be on your report as settled for lees than owed.

also call Lexington law firm and the can help remove bad items. 3 guys at work done it and has worked like a charm

I did it myself for nothing. I settled my accounts and had them removed. Like I have been telling the op it just takes some time and research to find out your rights and what can and can't be done.

 

[rGrimes]

Also, remember that debt that is forgiven, is considered personal income to you, they report it to the IRS, so should you...or you could end up with a suprise!

 

[Giants83]

Also, remember that debt that is forgiven, is considered personal income to you, they report it to the IRS, so should you...or you could end up with a suprise!

The companies I settled with sent me tax forms at the end of the year. I had to claim them like you said.

 

[Deleted member 121863]

one thing I have not seen mentioned so far is sometimes the original creditor will want to 1099 you the amount being written off! Now that is added as income for the taxable year. I don`t think secondary credit collector dirt bags do that though.

 

[Giants83]

one thing I have not seen mentioned so far is sometimes the original creditor will want to 1099 you the amount being written off! Now that is added as income for the taxable year. I don`t think secondary credit collector dirt bags do that though.

It was just mentioned above. I don't know the rules in that though. You may be right to a point. Some collection agencies sent me one and others didn't but regardless the question on the tax forms you file don't specify.