Mortgage Lenders View On Charge Offs

Many mortgage loan borrowers wonder if a charge off or multiple charge offs will disqualify them from getting a mortgage loan approval and the short answer to that is no.  FHA allows for mortgage borrowers to qualify for a FHA insured mortgage loan with prior charge offs.   Charge offs will remain on your credit report for 7 years from the date the creditor reported from your date of your last delinquency.  This is a federal law and is mandated and regulated by the FCRA, which is also known as the Fair Credit Reporting Act.  Charge offs will initially have a negative impact on your credit scores, however, after two years, charge offs will have very little or no impact on your credit scores.  All negative items, with the exception of a Chapter 7  bankruptcy, remains on your credit report for a period of 7 years and after the 7 years are up, the three credit reporting agencies needs to remove them off your credit report.  This 7 year period is called the statute of limitations and is enforced by the Fair Credit Reporting Act, FCRA.

How Are Credit Card Deliquencies Reported?

If you have credit card accounts that are currently open, the three credit reporting agencies will post the most recent credit card payment history.  It does not matter whether your credit card payments are being paid on time or you are behind on your payments.  For credit card accounts that are closed, whether your credit card payment histories have been on time or you have been a late payer on them.  On credit card accounts that you have closed, the creditor will post the final closed status of your credit card account to the three credit reporting agencies.

Charge Offs: What Are Charge Offs

Charge offs are credit accounts where a creditor writes off the debt you owe them after they try to collect on them and deems it as an uncollectible debt.  The creditor can possibly sell charge offs to collection agencies or can pursue in getting a judgment issued.  A mortgage loan borrower can still qualify for a FHA insured mortgage loan with charge offs and open collection accounts.  If you have charge offs and collection accounts in the past and is still on your credit report and need a mortgage lender in Illinois, Florida, Indiana, Texas, Kentucky, Wisconsin, California, or Wisconsin, contact me at 262-716-8151 or at www.gustancho.com .  I deal with borrowers with prior charge offs and open collection accounts all of the time and have no problem in closing on the mortgage loan without having to have them paid off as per FHA mortgage lending guidelines.

Judgments: Can I Qualify For A Mortgage Loan With An Outstanding Judgment?

A judgment is probably one of the worst derogatory item you can have on your credit report if you intend in applying for a residential mortgage loan.  The good news is that I can still qualify you and approve you for a residential mortgage loan in Illinois, Florida, Texas, Kentucky, Wisconsin, California, and Indiana with an outstanding judgment as long as you have entered into a payment agreement with the judgment creditor and have made two payments and can provide two month’s of cancelled checks.  A judgment is when a creditor takes you to court for not paying your debt and the court issues a judgment.  A judgment stays on your credit report for a period for seven years.  After 7 years, the judgment record needs to fall off your credit report.  Even if you were to pay off your judgment, the judgment report will remain on your credit report, however, it will state it as SATISFIED JUDGMENT.  Again, as with charge offs, a judgment will eventually plummet your credit scores but as time passes, it will have less and less impact on your credit scores.

Never Pay An Old Collection Account Or Delinquent Debt: It Will Plummet Your Credit Scores

I do not want to provoke folks not to pay on their old debt obligations but I strongly recommend that you do not pay an old collection account.  If you do, it will plummet your credit scores by at least 80 or more points.  In the event if you have a mortgage lender who has their own lender overlays and requires you to pay off some old collection accounts, do that at closing.   Paying off an old collection account will reactivate that credit account as a current account and your credit score WILL DROP!!!  BIG TIME!!!  I have seen so many times where borrowers made this mistake and hurt their chances in getting a mortgage loan approval.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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