I'm in the process of clearing up my debt and I want to know if lenders look at settlements as a bad thing?

Question

I planning on buying my first home by the first of the year.

Answer 1

they are dings but don't lower your FICO scores as much as an unpaid debt...

Answer 2

What a lender sees when your credit is looked at is first haw many points. Then on your open accounts they look for 30 60 & 90 day lates. Then on your opens they check to see if you have too many opens with $0 outstanding9They will ask you to close some of those to make sure you don't rack up that debt after closing and jeopardize the home loan. They also look to see that you dont have too many accts that are 80%-85% or more full they look at you as a prime candidate for a bankruptcy.Settlements fall in to that area that depends on how many collection agencies the debt has been passed on to. Any settlement you make please insist that you receive something i writing stating that the debtr is considered SETTLED IN FULL. Also do not apply for any new cards between now and your home purchase as well as any big ticket items that might prompt your credit to be run. Everytime your credit gets run it takes points from your score. Lastly do a little shopping around and go to a mortgage broker. Brokers have established relationships with several lenders and will run your credit once decide what lender will best work for you and then the lender will run your credit again. This will not affect you adversely as they know what and when the broker ran your credit. I also recommend a real estate attorney. Lastly it sounds like you need a good year based on your question to get yourself in a good postion to purchase your home.
I wishlots of happiness and joy in your new home. By trhe question you asked you seem to have good instincts and should do well.

Answer 3

The first thing that they look are the scores. Mortgage lenders use the middle score of the 3 bureaus, regardless of which bureau it's from. It is the most important thing, because even with a perfectly clean credit report, you'll have difficulty with low credit scores. (The score takes into account the % of outstanding credit to the balance, length of time the account is open, and a lot of other factors.) Then, equally as important, is the payment history on any existing mortgage accounts, or any from the last 24 months. If you haven't had a mortgage, then they look at your rental payment history over the last 24 months. This is as important as if you had a mortgage. Third, they will look at the derogatory accounts shown on your credit report, the nature of them, and the dollar amounts involved. It's payment history, that counts: Did you pay it on time as agreed, or not. 30 days late is not good, 60 day lates are worse, 90 days late or more is bad. Judgments are really bad. If you settled an account for less than the amount owed because it was in a collection status, it won't matter anymore than if you paid it in full.

Answer 4

Yes, it is a negative factor that will effect your FICO score. These settlements can remain on your credit report for 7 years. It is seen as a negative because you did not fulfill your original payment. However, it does depend on how long ago the settlement occurred. It is more detrimental if this happened recently.

BTW, if you receive a buyout offer to resettle an old debt from a secondary collection agency. Ignore the request. These agencies buy old, retired debts for pennies on the dollar. Then they try to collect 50 % of the original debt. If you respond, this debt can be re posted on your credit report again.

Answer 5

In cleaning up your debt there are a few tricks to trade that you might want to get done. Lenders only see what is on your credit report and time increase your credit score.

Here is one thing that you can do when talking to the people you are in debt to and clearing up your debt. Once you have made a deal with them, tell them you want to send them a contract and you want your credit to reflect "PAID" not paid collection. I have yet to see a company turn this down as of yet. This method takes away the paid collection.

You want to make sure that the company understand, so send them a little contract that you can draw up, nothing fancy.

I am willing to send you an negotiable instrument such as a money order or cashier check immediately upon receipt of this contract. Please mark your debt on my credit report as "PAID". Once I have this signed contract I will immediately send you the funds we agreed upon.

If the first person you speak with at the company can not agree to this, ask to speak to a supervisor, and eventually a manger until someone agree to this agreement.

I hope this has been of some use to you, good luck.

"FIGHT ON"

Answer 6

Depends on the settlement. If you used a consolidation agency (CareOne Credit Assistance, etc.), they will want to know why you went through an agency, and not deal directly with the creditors and pay. It's a little more of a hassle, but that is about it. Settling directly with the creditors looks better because it shows that you owned up to what was given to you, and made the effort to make things right. They will probably charge a higher interest rate to you because of your credit past, but they may still give you the loan.

Answer 7

Yes they do..settlemnts do look bad...they might think you'll settle with them some day

Answer 8

it helps your credit score (barely) the fact that it went to charge off is what hurts the most

Answer 9

yes