Repairing Your Credit 101
So by now, you should have your Tri-Merged credit report in front of you for each of the borrowers that will be buying a home (if you do not have a copy of your credit report, we recommend you obtain your own copy before starting your home buying process).
If you reviewed the You And Your Credit page, you should also understand how to read it and how to manage your credit.
Now, the big question is, how do you fix it the RIGHT WAY during the process of purchasing a home.
The most important rule – NEVER tell a collection agency you are preparing to buy a home. If you do, they will leverage this fact against the amount owed and become simply inflexible on settling for an amount less than you owe under the FALSE impression an underwriter will require you to pay the collection in full.
If you already have, and are now experiencing this inflexibility with no options, we suggest you inform the collector that satisfying the debt is NOT a requirement of an underwriter, but something you want to do to repair your credit for the future and start your home ownership with a clean credit slate. Advise them politely, this is there opportunity to be paid. Give them an amount you are prepared to settle for (make sure you’re ready to pay!), and give them a date two or three weeks into the future as your mythical “closing date” to settle by. Then sit back and wait.
You have absolutely nothing to lose at this point. Use this process only as a method of last resort!
MYTH: You must pay the full amount the collection agency wants you to pay!
FACT: Third party collection agencies pay pennies on the dollar to purchase your debt outright from the original creditor. Typically, you can and should settle any legitimate debt for at least 50% of the amount owed. If the debt is really large, you may wish to hire an attorney to review your state statutes with regards to third party collection activities. Some states, may not allow for a third party collection agency to charge more than THEY PAID for the debt plus interest and reasonable collection fees.