Credit Tips For My Borrowers (Stuff You NEED to Know)

Mortgage and Lending with SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) NMLS 223495

What affects your credit score: Mike in Tucson, Mortgage LenderCredit tips for my borrowers, by Mike in Tucson, mortgage lender

The question:  "I want to improve my credit.  Should I pay off charge-offs and collections?"

How the system works:

Take a look at that yellow piece of the credit pie on the right.  Length of credit history is 15% of your overall credit score.

Among the data tracked by the Credit Bureaus is this little gem:  "date of last activity."  It shows on your credit report as DLA.

Let's say that you've come to me for a purchase money mortgage because your agent referred you.  Let's say further that you did some dumb things six years ago when you were in college, and you know that a few derogatory accounts are going to show up from that time.

The old beater you had in college was repossessed by the car dealer whose billboard still reads "NO CREDIT?  NO PROBLEM!  The dealer sold the car at auction, and sent you a bill for the difference.  The bill was for $580.  You didn't pay it.  The car dealer sold the debt to a collection agency.

Your credit report today says "DLA 11/2004."  If you do nothing, this derogatory collection account will fall off your credit report next November, after 7 years.  That's if you do nothing.

But you're making good money now working for Raytheon as an engineer, and you think to yourself "I can pay that.  I think I'd better get that paid and off my credit report before I go see the mortgage guy..."

You get out the checkbook, call the collection company and pay the $580.

What that means to you:

  • Derogatory accounts can be reported for seven years from the date of last activity.  What would have fallen off in 2011 will now be reported until 2017.  Oops!
  • You paid a debt, and yet it's more than likely that your credit score will go down in the near term.

If, on the other hand, you pay off a collection or charge-off that is 12 to 24 months old, it's likely that your score will improve!


If you're my borrower, please call me before you do anything.  Let's talk it over, and improve your chances of qualifying for that home you want to buy from your favorite agent!


I'm Mike in Tucson, your preferred Tucson Mortgage Lender.

NMLS #223495

SUNSTREET MORTGAGE llc ~ Correspondent Mortgage Bank
Offices (AZ) Mesa, Tucson, Nogales, and Albuquerque, NM.



Re-Blogged 8 times:

Re-Blogged By Re-Blogged At
  1. Emmary Simpson 11/23/2010 11:36 AM
  2. Michael Lissack 11/23/2010 11:31 PM
  3. Margaret Woda 11/24/2010 12:54 AM
  4. Christine R. Sutherland 11/24/2010 01:12 AM
  5. Julia Odom 11/24/2010 03:30 AM
  6. Bob Souza (925) 513-3400 & Leilani Souza (916) 408-5500 Souza Realty - Real Estate Broker in Placer County, California 11/24/2010 07:48 AM
  7. Erica Ramus 11/24/2010 08:22 AM
  8. Curt Baumgarth 11/25/2010 02:44 PM
  9. Diane Williams 11/26/2010 10:35 PM
  10. Marilyn Boudreaux 11/30/2010 03:09 PM
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Missy Caulk
Missy Caulk TEAM - Ann Arbor, MI
Savvy Realtor - Ann Arbor Real Estate

Mike, that is very good information, I didn't know if you paid off a collection, it made it come back up on your credit report. Thanks!

Nov 24, 2010 01:02 AM #13
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Mike, this is good information. I would have thought paying off the debt would have been a good thing. Thanks.

Nov 24, 2010 01:30 AM #14
James McGary
Agents Set Free, Inc - Irvine, CA

Great reminder.  We often don't explain it this clearly to buyers.

Nov 24, 2010 01:38 AM #15
Kamal Salim
Oceanica Realty - Weston, FL
A Superior Level of Service !

Thank you for sharing, great post

Nov 24, 2010 01:43 AM #16
Ann Allen Hoover
RE/MAX Advantage South - Hoover, AL
CDPE SRES ASP e-PRO Realtor - Homes for Sale - AL

Isn't that crazy?  Goes against all logic.......and underlines the need to get professional advice!

Nov 24, 2010 01:52 AM #17
Mike Jones
SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) - Tucson, AZ
Mike Jones NMLS 223495


Truer words were never spoken.  :)


You're welcome.  Thanks for stopping by to comment!


Why don't we require a course on Credit in High School?


Yep!  It depends on what kind of debt, and how old it is.


Maybe a course on this would be good for CE classes for Realtors.


That borrower will have to establish credit before being able to qualify for a mortgage.


Thanks so much for the link!  We need more education about crredit.


It's not intuitive, is it?

Mike in Tucson

Nov 24, 2010 02:13 AM #18
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

I like your post and your style.....I am an advocate of just paying cash (if you have it) for what you need...I am sick of the current credit systems who brand you over time like your a criminal....

Nov 24, 2010 02:57 AM #19
Julia Odom
Select Realty Professionals - Chattanooga, TN
Chattanooga Homes for Sale

I've told people this before and it's a crying shame that it's true! I've also seen instances where, just because you contacted the collection agency about the debt, they changed the DLA.

Nov 24, 2010 03:28 AM #20
Irene Kennedy Realtor® in Northwestern NJ
Weichert - Lopatcong, NJ


It does seem totally backwards but it is true. Good of you to warn folks!

Nov 24, 2010 06:09 AM #21
Bob Souza (925) 513-3400 & Leilani Souza (916) 408-5500 Souza Realty - Real Estate Broker in Placer County, California
Souza Realty - Roseville, Rocklin, Granite Bay, Loomis, Penryn, Newcastle, Lincoln, Auburn, Meadow Vista (Placer Coun... - Roseville, CA
Homes & Land, Real Estate Investments and Rentals

Mike, thanks for your enlightening's good info to pass along to everyone, no matter how much it really doesn't make sense, so I'm re-blogging this. I guess anyone who needs credit just needs to play the game, even with its silly rules. :)


Nov 24, 2010 07:44 AM #22
Erica Ramus
Erica Ramus - Ramus Realty Group - Pottsville, PA - Pottsville, PA
MRE, Schuylkill County PA Real Estate

Mike -- someone told me that recently and it sounded too unbelieveable to be true. Thanks for the info. I am reblogging.

Nov 24, 2010 08:20 AM #23
Nancy Conner
Managing Broker - City Realty Inc - Olympia, WA
Olympia/Thurston County WA

Good info - some of the ins and outs of credit scores are certainly NOT intuitively obvious.

Nov 24, 2010 08:22 AM #24
Renée Donohue
Savvy Home Strategies Realty, LLC-REALTOR®-Estate-Probate - Las Vegas, NV
Las Vegas Real Estate Broker -

Ouch - very nice pie chart and easy to understand!

Nov 24, 2010 12:08 PM #25
Denise Hamlin, Broker/Owner
Cardinal Realty ~ 319-400-0268 - Iowa City, IA
Helping Happy Clients Make Smart Choices

Now that is interesting Mike. Yes, the moral of the story is that if you have problems with your credit talk to a lender before you do what you THINK you should be doing.

@Renee. Had to smile at your comment about the pie chart. You're a push over when it comes to charts, aren't you? <another smile>

Nov 24, 2010 01:46 PM #26
Greg Freeman
Citiwide Real Estate Services - Allen, TX

Great tips, its good to learn about the credit reporting system.  Tell us more

Nov 25, 2010 03:27 PM #27

Thanks for sharing this... credit is more important than so many realize!

Nov 25, 2010 03:45 PM #28
Tony and Suzanne Marriott, Associate Brokers
BVO Luxury Group @ Keller Williams Arizona Realty - Scottsdale, AZ
Serving Scottsdale, Phoenix and Maricopa County AZ

Sage advice from one of the masters of the mortgage market - thanks for the tips!

Nov 26, 2010 03:17 AM #29
Diane Williams
Pell City, AL

Mike thanks for sharing this excellent advice and tips. In today's economy we never know what might happen to cause some damage to our credit report. 

Nov 26, 2010 10:18 PM #30
Teral McDowell
Referral Patners LLC - Murphy, TX

A gMerry Christmasood one, Mike, and I like your pie too.

Nov 28, 2010 10:36 AM #31
Dave Sullivan
Real Estate One - Birmingham, MI
Michigan Realtor with an investor viewpoint

Nice Job Mike but I am disagree with paying any collection more that a month old...  any longer and your score will dip...  but thanks for the info..

Jan 06, 2013 09:56 AM #32
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