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Soxownyankees

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Paying off collections to buy a home.
I was told to do this from loan officer before my mortgage can be approved. But everything I read everyone says not to pay them. So what does one do here? I had got a commitment letter from mortgage company stating if these collections were paid then there wouldn't be a problem.

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To pay or Not to pay....

Helpful to 8 out of 9 people

Please understand that loan officers are just middle-men.  So dont get too caught up in what they have to say.  However, they 'do' know most of the in's and out's for underwriter conditions. 

Collections can, and do, hurt your overall credit score.  But if you look at them individually you might not want to pay them off.  The biggest reason is they could fall off without having to pay them at all.  Meaning that once an old collection is past the 7 year mark from closing, it no longer affect your credit.  The biggest part to understand here, is the close date of the original creditor as that is the start of the 7 years.  Items that fall off on their own will no longer hold your credit hostage.

However, if your debts are fairly recent, you will want to clear those accounts with a paid in full status if possible; as that's the part that most affects your credit. 

There's lots of tips on Credit Karma on what to do with recent and active collections.

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