Hi everyone, I'm new to this site, but have learned lots of information by working with people to help repair my husbands credit. With that being said ..here's my situation.. We've been working with these people since Jan 3rd to fix our credit. They've so far been able to completely remove 12 items from my husbands report and has raised his credit score over 60 pts in that time. We're trying to get an FHA loan but back in 2007 my husband was incarcerated and his truck was repo'd. According to the broker, this is the reason why we're unable to go any further with processing this loan, as well as it showing as a "dispute" on his CR. Something to do with any "dispute" automatically kicks it out of the system as a denial. The credit repair people we're working with suggested we try and settle the debt with the CA but only if they agree to send the letter of intent of deletion .. we'll it's with a company who absolutely refuses to do so. They've agreed to settle for 60% off the original amount, making it $4300 due to settle. My question is .. how badly will settleing this debt affect his credit score? We're told they can't help us if the score isn't a min of 640, right now the middle score is 690 ... if we pay this debt, is it possible his score will fall below the min requirements? Do I have any other options? I live in Kentucky, the SOL is 6 years, however the collection agency has a recent date of 2/2012 since they fixed the balance. The CA told me it was charged off as of 9/28/2007. Isn't the SOL based off of the last payment made, or no? Thanks for your help and advice on what I can do in order to get approved for a loan the quickest way possible!
Welcome to Creditnet! We're glad to have you as part of our community. The SOL and the fall-off date are based on the DOFD (Date of first delinquency), and that date should never change. If the debt was charged off in 2007, then you've got quite a few more years before it will drop off his credit reports. Settling with the CA isn't going to help his FICO scores in the short term unless they agree to delete, but it will update your credit reports to show that the debt has been paid. To a mortgage underwriter, a "paid" charge off is obviously always better than an "unpaid" one. It's tough to say what kind of negative impact it will have on his credit scores though because there are so many other factors at play. The debt is already almost 5 years old so this debt should have less of an impact on his scores, especially if he has more recent positive activity. I think it's worth the risk to get the debt taken care of once and for all, and my feeling is that it's not going to drop his score more than 50 points. That's just a guess though since I don't anything about the rest of his credit profile.
According to the people helping us repair his credit, they're stating that the "age" of the debt goes by the last activity date which would be 2/2012 .. so it's almost as if it's brand new, which he's saying it would affect the credit quite a bit because of that .. This is all a big pain in the rear! It's like I'm stuck because the repair people say paying it is all a timing issue - that I would need to pay it off about the week of the closing - but according to the broker, I can't go any further because they'd never be able to get anything approved if we don't take care of the repo. The broker is basically getting all the i's dotted and t's crossed before he puts us through this mess and possibly not be able to get anything approved time the closing comes. Does that make sense?
The DOFD should never change, and that's what the SOL is based on. Also, the SOL has nothing to do with the length of time something can be reported on his credit reports. When the DOLA is updated, that doesn't mean that the debt will stay on his credit reports for another 7 years. That's not how it works. A recent DOLA will make the debt look more current though, which obviously isn't what you want in this situation.
If you haven't been sued, and gotten hit with a judgement, I'd just wait the 2 years for the debt to fall off the credit report. Why pay $4300, which may not increase the credit score, nor result in a mortgage approval? I do not think house prices will increase in the next 2 years, so it makes sense to continue renting and wait the debt out.
I appreciate your opinion BC - We've decided to go ahead and pay it off and let our credit repair people fix that tradeline once it shows as paid. My husband doesnt want to take the chance of them garnishing his check each month for the full $10,920 rather than paying off the bill and saving 60%, having it show as a paid repo, opposed to a non paid repo looks better to the mortgage company anyway. Thanks for your help everyone.
