People are such in a hurry to close on their mortgage, ignoring the fact that paying a simple collection item can totally torpedo their mortgage loan. I have come across two such mortgage customer in the last few weeks.
Here Is The Problem:
A mortgage customer learns that there is a collection item on his credit report. He has no idea what it is. Sometimes, it’s the product of identity theft. The customer thinks that the path of least resistance is to pay the damn thing and it will come off the credit report. Boy, were my clients shocked and heart broken when they found out that just the opposite happens.
When you pay a collection item, two things happen;
1. You are admitting that it’s your debt. Hence, any chance of getting a court to order that item off of your credit report goes down the drain.
2. The collection item is frequently reclassified as a “paid” collection item; its not removed.
So what should you do?
If the collection item is the product of identity theft
Go get a police report. Its simple and painless. Tell your client to take his credit report to the police station, show the detective the item that is not yours and get a report. We will send a dispute letter for your client and attach the police report.
We can usually get that item removed within 30 days. If not, we will file a lawsuit that will not cost your client a thing and can probably get it removed within 60-90 days.
If the collection is simply not familiar to your client
Then have your client call the collection agency and get verification of the debt. Your client will either recognize the item or not. If he does not recognize the debt, we can dispute that item without the necessity of a police report.
If the collection item is legitimate
Do not pay it until you get an agreement with the debt collector to REMOVE the collection item from your credit report altogether in exchange for payment. Be sure to get the agreement in writing before your client pays the debt. Get the debt collector’s fax and email to be sure that you send a confirmation of the agreement to the debt collector if they refuse to give you something in writing to memorialize the agreement. Do NOT settle for a notation of “paid in full” as this will still screw up the deal.
Whatever you do, do not let your client pay the debt without looking at this article first so she can take the best action possible to get the item removed from the credit report.
If your client has items on his or her credit report that are inaccurate or that don’t belong to him or her, call me, Attorney Gary Nitzkin for a free, no obligation consultation (404) 591-6680 or email me at firstname.lastname@example.org.