Buying house after c/c settlement

I had a client purchase a home within 12 months after he settled his final account. Of course, this was prior to the credit crunch. But, after the credit crunch, I had another client whose credit score was 666, with one account still outstanding (not settled yet), and he was able to refinance his mortgage. This occurred within the last nine months, if I remember correctly. But, he was always current with his mortgage payments, as well as his car payment. And, his first account was settled approximately three years ago. It was a slow process for him due to the fact that he ran into a lot of unforeseen circumstances along the way. One more client was able to purchase a home after settling approximately 11 accounts, with three to go. BUT, he did so with a land contract, and in his case, the home he owned prior to this was sold via a short sale.

These are the most memorable cases I recall, but I'm sure many others are similar, as far as circumstances, etc.

Make sure that your accounts are all reflecting zero balances on your credit reports, and check your scores regularly if you can. If you were setting money aside each month to offer your creditors, continue setting the same amount (or more) aside so that you'll have a nice down payment when the time comes. Hopefully you'll be ready within a year or two.

Good luck - and congratulations on being debt-free.

Any negative item will remain in your credit report for 7 years. However, once you've paid off the debts, the impact of the negative items in your credit report will reduce with time. Nevertheless, you can even contact your creditors/collection agencies and negotiate with them so that they remove the negative items from your credit report. However, it will be the discretion of the creditors/collection agencies whether or not they will do so.

The negative items will remain your credit report for 7 years from the date of first default on the account. Once you have settled the account, the CA/creditor will update the account status as "Paid as Settled" or "Paid as Agreed" on your credit report.

You can request the CA/creditor to delete the item from your credit report purely out of good will. But it will be their discretion to accept or reject your request.

Yes, the negative items will remain on your credit report for seven years, but this will not make you ineligible for a mortgage. As I said, continue saving for a nice down payment, make all of your other payments on time, and you very well may qualify for a conforming mortgage within a year or two.

Thanks guys. This gives me an idea at least. I know that I still run a risk of negotiating with the credit agencies that they'll refuse to remove such negative info., but at least a prospective lender can see that I've never defaulted on my current mortgage (as I have a renter) and can feel more confident to "lend" to me. 7 years of punishment is better than 10 years if I had chosen to take the bankruptcy route I guess.

You're absolutely right, Rozo - your choice to settle is better than bankruptcy.

And, believe me - you will not suffer the consequences for 7 years. These delinquencies will remain for 7 years, but your credit score will improve with each passing month, and you will qualify for credit, as well as a mortgage within a few years.

Have a good weekend!