Southern California Mortgage Blog

Danger Zone: Paying Off Collection Accounts

Paying Off Collection Accounts

If you have a collection listed on your credit report and you are getting ready to refinance or buy a home, then you definitely need this advice:

It is very important to know that the possibility of any collections on the credit" is discussed before running the credit report." If I were to run your credit through General Mortgage, the report would be marked and categorized as a mortgage report. A recent mortgage inquiry on your credit can make it next to impossible to negotiate the pay-off of a collection account for anything less than what the collection agency demands.

Let's say the balance on the ambulance bill that went unpaid by your insurance now shows up on your credit report. If you took that ambulance ride two years ago and paid the bill today, you would have tanked your credit scores by making that collection brand new again.

If no mortgage inquiry has been made and we had ordered the free annual credit reports and discovered the collection, then I could negotiate for you in"paying off the collection. This is much harder to get it completely removed that it was two years ago.

That negotiation might include paying less than the collection agency wants for the bill and would always include the collection agency removing the account from ever being reported again. I have successfully done this many times for my mortgage clients. It is especially important because a newer collection can take up to 80 points off of your credit scores.

There is more on this subject in my book on credit and credit scores." You can check it out at www.CreditFitness.net.

Free Annual Credit Reports

You are entitled to a copy of your credit report each year.

You can order the reports on line, but be very careful that you use this exact address:

https://www.annualcreditreport.com/cra/index.jsp The are sites that are similar and can cause you to give your private information to identity thieves.

I prefer and advise that you write a letter or call each of the three main credit repositories.

They are:

Equifax Credit Information Services 

PO Box 740241 Atlanta, GA 30375  By phone: 1-800-216-1035,

http://www.econsumer.equifax.com/equifax.app/Welcome

TransUnion Corporation

PO Box 390 Springfield, PA 19064-0390 By phone: 1-800-888-4213

http://www.transunion.com/CreditReport/

Experian

ATTN: NCAC

PO Box 949 Allen,  TX 75002 By phone: 1-888-397-3742

http://www.experian.com/consumer/index.html

I prefer to have the written reports mailed to my clients because they are easier to read.

It is important to get your reports every year to review what is on each one. 72% of credit reports contain errors and of that 72%, twenty-five percent of those will cause a borrower to be declined on a loan.

Obtaining your annual credit reports is essential to protect your credit profile from identity theft. Check out www.CreditFitness.net for more information.