If your broker is placing you with BC lender, most of the lenders don't care for the medical bills you have on your credit report.

Depending on the lender, you can have collections depending on how old the collection date is and the amount. If the collection was filed over 24 months ago, most subprime lenders disregard those collections. Another factor a lender will look at is the total amount owed in collections. Some lenders will allow you to have collection amounts not exceeding $2000. Government collections however, must always be paid since they can become a lien that attaches to the title of the property.

There are some sub-prime lenders, also known as B/C lenders, who will not care about collections at all when you are buying a home or refinancing your home. Some lenders will allow open collections up to a certain total amount and they can not exceed that amount or they will need to be paid to buy a home. Other lenders will not allow you to buy a home with any collections present at all, even if it was just a $50 medical bill. This is a good reason why it is good to take a look at your credit yourself a few months in advance of obtaining a loan to see what is reporting to your credit report and if there are any items that you need to take care of or have corrected before you begin trying to buy a home and obtain home loan financing. Sometimes you may have old collections that have been paid for showing up on your credit still. It is amazing how many collection companies out there don't have problem reporting collection accounts to the credit bureau as quickly as possible but when you pay off the collection, they don't seem to care about properly reporting the fact the collection was paid to the credit bureau. Therefore, collections can impact the availability of which lenders you can use to finance your new home purchase. No collection accounts can open up a wider variety of programs and lenders for you to choose from while having a lot of collections can really shut the door on the use of many lenders and may require you to obtain a loan with terms that are not as favorable.

Although you can leave collections open and still secure home financing the higher interest rate you will be charged by leaving them open may or may not cost you more over the life of the loan. Talk to your mortgage broker about financing options when open collections are involved.

Collections account - If you have open collection accounts, you can still get a loan. Often the lender will require you to pay them off, or to pay off certain accounts, even if they are for very small amounts. If you have the ability, you should pay off your valid collection accounts as soon as possible.

Many non-prime banks have loan programs that ignore certain non-essential collections. However, borrowers of this type of sub-prime loans ought to expect to pay a little higher interest rates.

Request a free copy of your credit report to see if there are any collections on there that you were unaware of. This should be done well before the time you plan on getting a new mortgage. You may be able to dispute the ones that are incorrect, and this should help raise your credit score.

Most subprime lenders will ignore medical collections and collections that are over 2 years old. If however you want a conforming loan you will need to pay all open collections off at the time of close.

All subprime lenders, lenders for people with below average credit or whom need some type of creative financing, have their own guidelines on how to deal with collection accounts. Most of them will allow open collections up to 2,500 or even 5,000 to remain open. A few lenders will not require any collections to be paid off no matter how much is owed in collection accounts and others will require that all collections be paid off regardless of the amount. Therefore it is crucial to discuss your open collection with your loan officer and let him/her know of what your intentions are with the collections and if you want to pay them off through the loan or if you would prefer not to pay them off now. This may dictate which lenders you have available to use and get qualified for a mortgage loan with.

Even small unpaid collections can effect your credit score dramatically. To make sure your credit scores are as high as they can be, pay off any known collection accounts well prior to applying for financing. Many times a consumer will need to follow up with the credit bureaus after paying off a collection to ensure that the account is reported correctly as "Paid".

Open collections accounts can also be paid off in your refinance and rolled onto the loan itself.