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Charge Offs and Collection Agencies- Whats the relationship for fixing?

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Hello All,


I am new to this forum. I have been working on trying to repair my credit. I made mistakes, I was bad, I've grown up and realized the damage that I have done- time to fix.


I am struggling to understand the relationship between a charge off from an original creditor, and the same account once it is sold to a collection agency.


Goal- Obtain a mortgage

Stumbling Block- From everything I've read, there is no way you'll get a mortgage with charge offs on your credit report


I have two charge offs on my credit report, one from Orchard Bank, the other from Credit One Bank. Both were credit cards. They both were sold to Midland Funding/Midland Credit Management, who is now the collection agency on them.


Question 1- Lets say I have the money to pay the collection agency, Midland Funding, off in full for both of these charge offs. How would that end up showing as a paid charge off (which a mortgage lender would want to see) when the collection agency isnt the one reporting it as a charge off. They are reporting it as a collection account. The original creditor is the one reporting it as a charge off, a seperate tradeline. How does satisfying the debt with the colllection agency coorelate to the original creditor updating status to a paid charge off?


Question 2- Is it possible to make arrangements with the collection agency to pay the same above referenced collection accounts for agreement of deletion, essentially pay for delete of their tradeline, and still have the original creditors tradeline updated as paid charge off? Perhaps I need to know the answer to question 1 before I delve into question 2 too much, but it seems like they would go hand in hand.


Thanks in advance for any input, guidance, and help.

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Paying for deletion is not the magic bullet it sounds like. It is only for debts that are beyond the SOL in your state, and it would not remove the charge off. When did you stop paying on these cards, and what state are you in?

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I am in PA, so SOL is 4 years. One card was date of first deliquency in May of 2010, so that one is almost out of SOL. The other one was November 2011, so next year on that one. Ive had some success with paying for deletion, but the ultimate goal here is a mortgage. If it is true that mortgage lenders wont consider unless charge offs are cleaned up (i.e. paid) then I need to make arrangements to get that cleaned up. The problem there is, I still dont understand the relationship on how that reporting works. Let's say I straight up pay the CA the full amount (no PFD arrangements, etc), just straight up pay the collection agency- Ok, then how does the original creditor know to update the tradeline they are reporting as now a paid charge off? Do i dispute their tradeline once I pay it with the collection agency? Does the collection agency report back to the original creditor that it was charged off?


That is my pressing question. I need to understand how that works.

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If the debt was sold to Midland, the charge off (original creditor) should be reporting $0 balance. Are you sure it was sold?


I think, as far as the requirements for a mortgage, I should move this thread to the mortgage forum. In some cases, you can pay at closing, but I"m not an expert, and this might not be one of those cases.


Do you want this moved?

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I'm no expert either. Perhaps this would gather some more interest and feedback in the mortgage forum. Will your reply and my responses carry over as well, or just my original post? Thanks for your help.

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I see you went ahead and posted there. They can answer your questions regarding what's required for a mortgage, which is your real question. They're not going to give you a different answer about paying for deletion. :D

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I just got my pre approval yesterday. On my credit I HAD capital one charge off (OC) reporting as a $0 balance because it was sold to Midland and also the Midland account showing a $15000 balance. Last year I was able to get Midland removed from my report. So now the only thing on my credit report is the OC which is showing a $0 balance. When I did my pre approval the LO was verbally going over my credit with me and when he got to the CO he said, "I see you had some issues with cap 1 but it looks like that is all cleared up which is good." So essentially as long as it is listed with a $0 balance the loan company considers that ok. Now on your case you have Midland still reporting. You will have to pay off or get it deleted to get approved for a mortgage. If your scores are high enough to qualify then they may let you pay it at closing. If your scores don't qualify then they will tell you to get it paid first. The problem with paying it first is it will probably hurt your score because it shows recent collection activity.


So to recap, your reporting should look like this.


Orchard Bank-- charge off

current balance-- $0


Midland funding- open account/collection account

current balance--- $1000


If the OC is not showing a $0 balance then you should probably get that disputed with the CRA's. You have a chance at getting it deleted if that is the case but more times than not they will just update it.


ETA: I don't know that I have ever heard of anyone getting a PFD with Midland. They are not good to work with and couldn't care less about the consumer. They also like to sue so be careful if you are sending them any letters.

Edited by futurehomeowner?

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