Many times when I am working with a client there will be a couple of collection accounts, a judgment and sometimes a tax lien. So the question that many clients ask is, "do I have to pay off that judgment? It was 5 years ago".
Well if you want to be approved for a mortgage....yes. Mortgage lenders will require that any judgment or lien be paid if you want to be approved. Both liens and judgments can impact title to the property and that becomes the overwhelming reason for the strict rule on mortgages.
Collection accounts (that have not gone to court), do not impact the title to real estate and therefore will not necessarily be required to be paid. Some loans require collections to be paid if they total more than $5,000. Others mortgage lenders have slightly different requirements.
But the common vibe to all mortgage lending is that judgments and liens must be paid.