Home Buying in 19126>Question Details

Chauncey  May, Other/Just Looking in Cheltenham, PA

Paying off collection accounts,

Asked by Chauncey May, Cheltenham, PA Thu May 3, 2012

If you settle rather than pay in full will this lower your score?

I was told you lower your score when you settle.

Help the community by answering this question:


Good morning Chauncey May,

Recent activity on your credit history, whether that activity is on a "Good" account or a "Bad" account has a direct impact on the current credit score more dramatically than in the long run. Thus when you pay your bills on time and have no recent negative events you'll have a higher score. The converse is true: if you have a recent negative event---whether that's a late payment or a collection account being reported as paid---that negative event will lower your score immediately.

Bottom line is this: if you are preparing to purchase a home, meet with a Local Mortgage Banker for the best advice on your prequalifications. Not all Lenders and/or loan programs require that collection accounts be paid in order for a loan to be approved. Therefore you might do yourself more harm than good by paying off a collection account. Your Mortgage Banker will guide you accordingly.

I have blogged here on Trulia about the best way to settle collection accounts. See the link below.

Good luck!
Trevor Curran
NMLS #40140
0 votes Thank Flag Link Fri May 4, 2012
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