Should we settle or ignore a debt collection account?

by Amanda
(Minnesota)

In May 2008 I left a lease without notice because there was neglected maintenance and water damage.
A collection agency contacted me a few months later (Sept) and I disputed the debt. They sent a validation with the rental agreement, and I responded with another dispute and have not heard anything since (Nov. 2008).

The collection is on my credit report with a last date of Nov 08. Now I am trying to get approved for a new home loan and it is affecting the process.

What is the best way to handle this?
How do I even know the same agency has the account?
Do I contact the same one that I dealt with 3 years ago to find out?

I am worried that if I inquire or offer to settle (not admitting to responsibility for the debt) that it will 're-activate' the collection and hurt my credit even more.

Also, what are the chances that the collectors would settle for a low lump sum? And how would this affect my credit? Could it be completely deleted from my credit report?

Thanks for the help!

Comments for Should we settle or ignore a debt collection account?

Click here to add your own comments

Sep 27, 2011
 collection account and mortgage
by: DebtCollectionAnswers.com

Amanda,

Since you are going to try to get a home loan, presumably you have pulled your credit reports. The contact information for the collection agency should be listed there.

Before you do anything, talk with your loan officer. He or she will be able to help you understand how this will affect your ability to get a loan, and will be able to help you evaluate whether you need to pay it off or not.

If you aren't already working with a mortgage professional, we recommend ArcLoan.com.

Settling the collection account not help your credit scores. The only way to boost your credit scores is to negotiate with the collection agency to have them remove it in exchange for payment. But they are not obligated to do so, and you're right - they could use that against you.

That's why we are suggesting you work with a mortgage loan officer who has experience with this kind of problem. It's not unusual for an experienced loan officer to help their clients negotiate. It will help if you know that you have a back up plan.
Oct 03, 2011
 Outcome
by: Anonymous

We contacted the collection agency and settled by paying a smaller amount with the agreement that they will delete the file from our credit reports.

Click here to add your own comments

Return to Debt Collection Questions.

Learn how debt collection laws can help you!
This website does not provide legal advice.
All information is for educational purposes only.
Copyright 2007 - 2018 by Mary Reed and Gerri Detweiler.
All rights reserved.

Disclosure: We may receive compensation for marketing some of the services mentioned on this site. Above all though, our goal is to recommend products and services we believe can help our readers. You can learn more here.