Collections and judgments are serious liabilities that must be addressed as quickly as possible, if the applicant is pursuing mortgage finanicng. However, not all collection accounts and judgments are the same.
Judgments are probably the most serious of the negative credit entries. Bankruptcies and foreclosures are the most damaging types of judgments. Judgments remain on the applicant's credit report for ten (10) years after the discharge date. Other judgments include personal judgments and tax liens.
Delinquencies are past due bills that are at least 30 days late. Strictly speaking, delinquencies refer to past due amounts on currently open accounts. If the delinquencies are allowed to fester, they become a collection or charge-off account. In the case of cars, they can result in repossession.
Medical and utility collections are some of the most common type of collections seen on credit reports. Medical collections usually are now counted as seriously against the applicant. Most mortage lenders will require the borrower to pay off the collection and delinquency amounts prior to or duing the closing.
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