Will paying off a debt collection agency count against getting a mortgage?

chaoticbaker

I went through a period of ill health a few years ago that also had a detrimental effect on my finances. I burned through all my savings and racked up a significant amount of credit card debt. I've spent the last few years getting my finances in order and have built up some savings and paid off all my debts apart from one: an overpayment from a previous employer. I knew I owed some money but was contesting the amount. After a great deal of back and forth they have since passed the debt onto a debt collection agency. I have the money to pay off this final amount but I am hoping to buy my first home in the next year. My question is, once I've paid off the debt collection agency the transaction will appear on my bank statement. If a lender sees the payment on my bank statement could they end up refusing me a mortgage? I've checked my credit file already and there's nothing in it about the debt.

[Deleted User]

It will help getting a mortgage, as you would otherwise need to disclose the debt, reducing your affordability.

[Deleted User]

If the debt is no longer on any of the 3 credit agencies (have you checked all of them?) then a payment to a debt company is just one of those things. If a mortgage lender wants to see your bank statements fair enough but I thought most wanted to just see credit file and if self-employed especially, proof of income like wage slips 

phillw

chaoticbaker said:

My question is, once I've paid off the debt collection agency the transaction will appear on my bank statement.

The last time I wrote a cheque, it didn't show the payee on my statement.

Alternatively open an account and pay them from that.

chaoticbaker

Deleted_User said:

If the debt is no longer on any of the 3 credit agencies (have you checked all of them?) then a payment to a debt company is just one of those things. If a mortgage lender wants to see your bank statements fair enough but I thought most wanted to just see credit file and if self-employed especially, proof of income like wage slips 

Ah ok, I thought they routinely asked to look at bank statements. That's a relief to know, thank you.

sparklep0ny

chaoticbaker said:

Deleted_User said:

If the debt is no longer on any of the 3 credit agencies (have you checked all of them?) then a payment to a debt company is just one of those things. If a mortgage lender wants to see your bank statements fair enough but I thought most wanted to just see credit file and if self-employed especially, proof of income like wage slips 

Ah ok, I thought they routinely asked to look at bank statements. That's a relief to know, thank you.

They do, but only 3 months worth.  It's highly unlikely they'd be looking as far back as today if you're applying next year.