- Compare program-by-program treatment of medical vs. non-medical collections
- Identify when payoff helps and when it hurts the score
- Apply the 'pay-for-delete' negotiation when appropriate
- Recognize zombie / re-aged collections
Program-by-Program Treatment
- FHA: medical excluded; non-medical >$2,000 aggregate → 5% capacity hit
- VA: collections do not have to be paid; underwriter judgment
- USDA: collections may need payoff if they indicate ongoing disregard
- Conventional: collections on investment properties must be paid; primary residence rarely required
When Paying Hurts
On older FICO mortgage models (2/4/5), paying an aging collection can re-date the 'last activity' field and drop the score 20–60 points the month before closing. Always model the trade-off before instructing a buyer to pay an old collection.
Pay-for-Delete and Re-Aging
Get a deletion letter in writing before sending payment. Watch for re-aged debts (zombie collections sold and re-reported with a new date) — these are disputable under the FCRA.
- Don't pay old collections without modeling the score impact.
- Always negotiate deletion in writing before paying.
- Re-aged collections violate the FCRA and are disputable.
Module 6 Exam — 5 questions
Pick the best answer for each question. Pass with 80% or higher to mark this module complete.
- 1.
Paying off a 5-year-old collection right before close on FHA can:
- 2.
On FHA, aggregate non-medical collections above what threshold trigger a 5% capacity hit?
- 3.
A pay-for-delete agreement should be:
- 4.
A 'zombie' or re-aged collection is:
- 5.
On a Conventional loan for a primary residence, unpaid collections:
0 of 5 answered