How Can Victoria's Secret Stop a Homebuyer... My original title was going to be, "How to Delete Collections from a Credit Report." But I was trying to get your attention. Now that you're here, you might as well learn the answer and perhaps turn your next client into a bona fide qualified homebuyer, instead of a renter with a FICO score swirling around too low to qualify.
So you have a credit card from shopping, and at some point it went off your radar screen. It went to collection in the Collection account section on the credit report, and it drags the FICO credit score down. On the credit report, Collection accounts appear somewhere in the middle. Sometimes just paying off (not settling for less!) a collection will help a credit score because it stops "hitting" the credit as a current collection. Some items on a credit report only need to show as paid, for example a small collection that has not hurt the FICO credit score enough to disqualify a client.
But if you're making that call to the collection company, and the Collection item is disqualifying you from a loan, you will be trying to get a DELETION letter because that will give you the biggest increase in FICO credit score. Why do I capitalize DELETION letter? Because when I've told clients (in writing, in emails with detailed instructions) that they need Deletion letters, in their mind they seem to think "take care of the collections," and they pay them off (which only helps some) or settle them (which hurts the FICO score).
To get a DELETION letter, the client can take the following steps:
- Prepare to be patient, persistent and friendly. Try to be kind and understanding throughout, and say please and thank you frequently. If you are trying to fix the item for a reason (to purchase a home, for a security clearance, to use your VA eligibility), have your explanation ready. Sometimes, I've just said (truthfully of course!) my client is an active duty Marine and the only thing standing between him and using his VA entitlement to buy a home is this collection account. Whatever your true story for cleaning your credit is, be ready to share it and ask for help.
- Call the company that holds the collection account. You will be speaking to a low-level representative.
- Give them the account number that is involved. If they can't find it in their system, they will probably ask for your last name and/or social security number.
- Explain to the representative that you need a DELETION letter, on the company's letterhead, that says the account is being deleted with a zero balance.
- Ask how much they want ($) to give you a DELETION letter FAXED to you (see below). Some ask for the whole amount, but most will settle for less, sometime a third or less of what was owed. If they don't come down to something you can afford, say thank you, I'll call back.
- Call back and talk to a different representative, see if their answer changes.
- At some point, you may want to ask to speak to a supervisor about your situation. Again, try to be kind and understanding throughout, and say please and thank you.
- When you agree to pay an amount, however you pay it, you need a receipt or record that shows you made the payment. KEEP THE RECEIPT or PRINT THE COMPUTER SCREEN showing the payment went through. Paying by a cashier's check overnighted to the collection agency can be best, because once they receive it, they will not add language like "when funds clear, we will consider the account deleted." Ask them your payment options, and if you're not sure how you should pay, take the time to call your loan officer about what they want the letter to say. Then you can explain it when you call the collection company back.
- And when you've paid the amount, you need to ask could they please fax the letter? Insist on a fax: most will take 24 to 48 hours to get a fax out of their fax department. Their snailmail letter department could take 10 days to 3 weeks. The problem here is that often their fax/mail department fails to send the letter because the representative failed to follow procedures (or didn't ask for the fax/letter, or lied). You don't want to wait three weeks to discover their failure.
- If that fax doesn't come in 48 hours, call back, and explain that they told you if you paid $X, then you would get a DELETION letter. Remember the rule about being nice as you explain to them that they made a deal with you and they need to hold up their end of the bargain. Explain that this is now urgent because it's been 48 hours and your loan officer NEEDS that letter, and could they please put a rush on the fax request. Ask kindly to speak to a supervisor.
- I've used language after repeated phone calls that also seemed to work, to the effect of, "I'm sorry to keep calling back repeatedly and using your representatives' time and resources..." This gets the attention of people (especially supervisors) whose job performance is analyzed for being efficient. When dumped into one supervisor's voicemail several times, I used it (kindly) each time, and after 3 or 4 messages, I guess she believed me (that I would keep using their resources), and we got our fax.
- Repeat those last two steps until you get the DELETION letter faxed to you, or directly to your loan officer's fax machine.
Last, the obligatory disclaimer: this is just my anectdotal experience. I am not a credit counselor or expert, just a loan officer with experience in the trenches who has asked clients to get deletion letters, who has gotten on the phone and talked with numerous credit companies and explained and explained on behalf of my client. I've seen a FICO score rise 100 points (to 774) in three weeks when a client did two things: paid a collection (no deletion letter) to get it to stop hitting his credit and charged $20 on an old but active credit card one time. Each situation is very different. And the credit reports we pull when qualifying for a loan differ from those available to individuals who are trying to monitor and fix their credit. Consult a loan officer or other professional for your particular situation.
Lisa Delzompo (951-704-4559)
"May your home always be too small ... to hold all your friends!"
CA Dept of Real Estate, Real Estate Broker License #01379811;
NMLS Identifer #331744
REAL ESTATE: www.SandToSeaProperties.com. Covering northern San Diego, Oceanside, Temecula, Murrieta, Riverside County and desert areas of Yucca Valley, Joshua Tree and Twentynine Palms, CA.
LOANS: PRW Lending, Inc. Call direct 951-704-4559, or email me at lisa(@)sand2sea.us
Information is deemed reliable but is not guaranteed. Information is general and may not address your particular situation. Do not rely solely on this or any information you find on the internet. You should consult relevant professionals directly about your real estate, financial, etc., situation.