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Restoring Your Credit-Nothing is Impossible (The Cubs and Indians are Playing in The World Series!)

Congratulations to the Chicago Cubs and the Cleveland Indians for winning their respective league’s Championship Series and earning the right to face off against each other in the World Series.

As a lifelong fan of the St. Louis Cardinals, it is somewhat difficult for me to offer congratulations to the team from Chicago’s Northside, the Cardinals’ “loveable loser” rival for most of my lifetime. But, here it is: “Congratulations, Small Bears! Your long suffering fans deserve it! Good luck to you against the Indians!”

How unlikely was a Cubs/Indians match-up in the Series? The Cubs last played in the fall classic seventy-one years ago, they were last World Champions in 1908, an astounding One Hundred and Eight years ago! The Indians last earned World Series Championship rings in 1948, despite the fact that they have competed in the series three times since.

The Cubs and the Indians start their series in Cleveland tomorrow evening. Indeed, anything is possible.

As you enjoy the games between this unlikely pairing, perhaps it’s a good time to consider the things in your life that you consider “unlikely” to happen. Have you given up on the dream of home ownership because of poor credit? Do you think that your credit problems are something that are, “NEVER” going to go away?

Ahem, the Cubs and the Indians are playing in the World Series! Nothing is impossible, especially when it comes to your credit. I have written a great deal about how poorly educated American consumers are about credit scoring. I would hazard a guess that more Americans know the length of Joe DiMaggio’s record hitting streak (It’s 56 games) than know their own credit score.

Here’s an important piece of information for you to know about credit: Generally speaking, your credit score is “forward looking.” Just as the management of the World Series participants have rebuilt them into contenders, you can start to rebuild your credit, TODAY!

Where do you start? (First Base) -The very first thing that you should do is to obtain a current and complete copy of your credit report. You are entitled to obtain a free copy of your credit report every 12 months; here’s a great site for this.

Why start with your credit report? You can’t know the players without a scorecard. It’s the best way to see the “whole ballgame.” It will also tell you what, if any, negative items are being reported against you. Read it carefully — you would be amazed at the number of credit reports that look like they were assembled by Milwaukee Brewers Shortstop Johnathan Villar. (He committed 29 fielding errors this past season to the lead the Majors in that inauspicious category!)

What’s Next? (Second Base)-Make sure that you are paying your bills on time. Nothing damages your credit score as much as late payments. The longer that payments are late, the more damage they do to your score. So, if you’re behind on a payment or payments, make every effort that you can to bring those accounts current and once they’re current keep paying on time. (As Hall of Fame pitcher Tom Seaver said: “If you dwell on statistics you get shortsighted, if you aim for consistency, the numbers will be there at the end.”)

Then What? (Third Base)-Pay down the balances on any credit card debt that you might have. Credit utilization is one of the major factors used in determining your credit score. Good credit utilization means that you use credit, but you use it responsibly.

Ideally, the credit scoring formula looks for you to utilize 30 percent of a credit card’s limit or less. So, take the winnings from the wager that you made that the Cubs or Indians would make it to the World Series and pay down any credit cards you have where the balance is in excess of 30 percent. Do so, and you can expect to see your credit score begin to increase like Nolan Ryan’s strikeout total. (The Hall of Fame pitcher struck out an amazing 5,714 batters over the course of his big league career!)

Score! (Home Plate)-Doing the things that we have discussed as you “rounded the bases” will significantly help you to rebuild your credit score to a Championship level. There is much more that you can do to strengthen your score. Just like it did for the Cubs and Indians, the process involves dedication and hard work.

One of the key components of the Cubs’ and Indians’ successes was the hiring of a skilled, knowledgeable manager. You may want to investigate hiring a professional, reputable credit restoration company to help manage you along the path to better credit. A well-qualified credit restoration company will provide you with important guidance as to how to address negative items that appear on your credit report, help you to maximize your credit utilization, teach you how to acquire and properly utilize a secured credit card, and help you with negotiating collection accounts.

Enjoy the Series! Good luck to both teams!

Don’t Let Divorce Devastate Your Credit

This post was recently featured in The Huffington Post.

The ending of a marriage is a difficult process for everyone involved. Even if you are the one who “wants’ the divorce, it can be difficult to watch the impact it has on all those that it touches. If your spouse doesn’t want to be divorced, it can be difficult to watch that person struggle with the change. Needless to say, if the divorcing couple has children, the impact it has on the kids can have long lasting effects.

Many people who go through the divorce process also suffer long-lasting effects to their consumer credit. Indeed, a large majority of people that we help at my credit restoration business had “great” credit until the “Big D” happened. But somehow, during or after the process of dissolving the marriage their credit was severely damaged.

Sometimes this process is unavoidable. Maintaining two households on an income that used to pay for only one can lead to missed payments.

More egregiously, if the spouse who is the primary breadwinner chooses to use their earning power for leverage, they can simply stop paying the bills. Although this process more than likely damages both their credit, as well as their spouse’s, it can give them enormous negotiating power in the divorce. If the mortgage isn’t getting paid and creditors are calling the house for payment, a spouse who may not be in a hurry to get divorced may become motivated to get things over with and “settle” for less than they otherwise would.

A spurned spouse may also start to refuse to pay bills simply to “get back” at their soon to be former partner. Once again, both members of the couple’s credit will be damaged, but the spurned spouse “doesn’t care” they just want to get back at the husband or wife that no longer wants them.

That same rejected or angry spouse can also damage their ex’s credit after the divorce has been finalized. We frequently see instances where the order granting a divorce directs one party to pay certain outstanding debt that was incurred by the married couple. What happens if that party refuses to do what the court ordered them to do?

Our clients are frequently surprised when a creditor comes after them for debt that their ex was ordered to pay in the divorce decree. Guess what? The creditor was not likely a party to the divorce case. They don’t care if your ex-husband agreed to pay for a debt in the divorce. If you jointly acquired that debt while you were married, you remain responsible for it and they will come after both of you for payment. If your spouse doesn’t pay what they agreed to in the divorce or even if they fail to pay on time, it will likely be reported against BOTH of your credit history.

Pretty incredible, eh? You can take your ex back to court and have the court find them in contempt or request that the court order them once again to pay the debt that they previously agreed to pay, right? Going to court costs a significant amount of money. Attorneys fees can add up quickly and it is likely that your attorney is going to want to be paid before they head back to court on your behalf.

It may cost you as much to go back to court as the bill that you are going to court over. What if your spouse still refuses to pay or claims an economic inability to pay? More attorneys’ fees are a strong possibility.

Incredibly, many people end up paying the debts their ex promised to pay themselves. The damage the unpaid bill causes to their credit score costs them serious money. Additionally, they may not be able to obtain certain financing, like a mortgage while that unpaid debt is showing up on their credit report. Those credit cards in both of your names and that co-signed mortgage don’t seem so romantic anymore, do they?

Has your credit been damaged or destroyed by a divorce? Don’t give up. Credit is forward looking. A good credit restoration company can help you deal with problems like an unpaid debt that was supposed to be paid by your ex as part of a divorce decree. They can also help to educate you about how credit scores really work and give you the tools to get your score where you really would like it to be.

Thinking About a New Home? Start with a Credit Appraisal

This blog is also featured in The Huffington Post.

Dreaming of purchasing a new home in the next several months? Whether you are a first time home buyer, upgrading to a newer or bigger home, or downsizing into a smaller residence, the first thing that you should do is have your credit appraised.

Today’s real estate market is one that should only be entered into as an educated and fully prepared buyer. Demand is high in today’s market, and available home inventory is low. If you are not educated and well-prepared to make a firm offer, your offer will get less consideration from a seller than an offer from a customer who is ready to proceed to closing.

Can you imagine the anguish of finding the perfect home for you and your family, at the perfect price, only to discover that there is a credit problem that will keep you from securing a mortgage on that home? Credit issues often take time to resolve – weeks, if not months – could pass before you can successfully resolve your credit problems. Chances are, the perfect house with the perfect price is going to be sold to another buyer in today’s market.

How do you avoid that sort of disappointment? It’s simple, start with a credit appraisal! A credit appraisal is a thorough, detailed review of your credit history by an individual with expertise in reviewing credit reports, as well as detailed knowledge of mortgage underwriting standards.

An appraisal is just not about your credit score. You can have a high credit score (even in the 700s), but still have items on your credit report that will block you from being approved for a mortgage. We see these type of challenges at our credit restoration company regularly.

It is vitally important that your appraisal include credit history and a credit score from each of the three prominent credit reporting agencies (Transunion, Equifax and Experian). Mortgage providers look closely at the reports from all three of these agencies, and frequently accounts that are reported by one bureau aren’t being reported by the other two. If a derogatory item shows up on even just one of the reports, it is likely going to be an obstacle in your mortgage pursuit.

Credit history, alone, like the one you are able to obtain for free once a year is not enough. It is also essential that you have scores from all three bureaus reviewed.

It is imperative that these three scores are FICO mortgage scores. Believe it or not, there are all sorts of different credit scores out there today, and not all of them are the type of scores that are used to determine your eligibility for a mortgage. FICO (an acronym for Fair Isaac and Company, who now simply call themselves “Fair Isaac”) is a scoring model, or mathematical algorithm, that is purchased by credit bureaus and used to compute your mortgage credit score.

That score that you get for free, on your credit card statement or from online credit monitoring services? More than likely, it is not a FICO mortgage score. Other credit score models used by those companies can be as much as sixty points different from your real FICO score (we see it all the time).

Why does an accurate credit appraisal require all three scores? Mortgage companies use something called your middle score. I wrote about it in detail, here: The Shamrock and Your Credit Score, a few months ago. In short, your middle score is not an average of your three scores, and it’s not even the median of those scores. Mortgage companies and banks “throw out” your high score and your low score – sort of like how Olympic diving and ice skating are scored. They look solely at the middle of your three scores to determine whether you meet the credit score portion of their underwriting standards.

Even if your appraisal indicates that your credit score is high enough to qualify for an entry level loan (like an FHA loan) you may have the time and the opportunity to strengthen your score to a point where more favorable loan products might become available to you. Your time will be well spent building your credit score while you shop for your new home.

Once you have had your credit appraised and certified as credit qualified, you are “Real Estate Ready.” It’s time to take the next step and proceed to your bank or mortgage company for pre-approval.

Not to be confused with a pre-qualification, which is essentially a “rough” calculation of how much of a loan you might qualify for, a pre-approval is a written estimate from a lender stating how much you will likely be able to borrow based on your (now certified) credit and other financial information (like your earnings history.)

The application for a loan pre-approval often requires submitting pay stubs, bank statements, tax returns and other financial documents. Most lenders charge nothing for the application, since they are hoping to win your business, but some charge you (usually less than $100.00) to cover the cost of a credit check.

A credit appraisal will not only spare you from disappointment, it will also save you time. Why spend your valuable time with a realtor or lender, only to be told that your credit doesn’t qualify you to buy a home. With a certified credit appraisal the question, more often than not, changes from “Will I qualify for a loan?” to “How big of a loan will I qualify for?”

Get your credit appraised today. Knowing that you are “Real Estate Ready” and being certified accordingly, will provide you with significant leverage when you are ready to make an offer on a home. It provides assurance to the seller that you will be able to secure financing and makes your offer significantly more attractive than an offer that is contingent upon financing being secured.

Five Ways to Use Your Tax Refund to Build Your Credit Score

Ah, spring…..as you watch the trees and flowers begin to blossom, your thoughts turn to warmer weather and the arrival of your income tax refund check. Perhaps you have already made plans to spend those funds on a home improvement project or a luxurious weekend getaway. Why not spend that money getting your credit in shape? A higher credit score can provide you with opportunities like the ability to obtain financing to buy a new home or a new car. It can also save you money throughout the year on your insurance premiums and credit card interest rate.

How can the proceeds from your tax refund help to boost your credit score? Here are five suggestions:

 

  1. Get a Copy of Your Credit Report

The very first thing that you should do is to obtain a current and complete copy of your credit report. There are a number of ways to do this, from ordering one apiece from each credit bureau, or from myFICO.com.  Here’s a bonus for those of you who didn’t get a refund this year, but for some reason are reading this article anyway:  By law, you are entitled to a free copy of your credit report every 12 months; a great site for this is https://www.annualcreditreport.com/index.action.

Be certain that the report you obtain has information from all three of the credit bureaus (Experian, Transunion and Equifax). There’s a chance that something is being negatively reported on one of those three, but not on the other two.

Why start with your credit report? It’s the best way to tell what, if any, negative items are being reported against you. Read it carefully – you would be amazed at the number of credit reports that contain inaccurate information.

  1. Pay Down Your Credit Card Balances

Credit utilization is the factor that is given the second most importance in determining your credit score. It accounts for slightly less than a third of that score. Credit Utilization means that you use credit, but you use it responsibly. This part of your score suffers if you don’t use credit at all, it also suffers if you use too much credit and don’t pay it back in a timely and responsible manner.

Ideally, the credit scoring formula looks for credit utilization to be 30% of that card’s limit or less. So, take some or all of your refund money and pay down any credit cards you have where the balance is in excess of 30% of that card’s limit to a point where it is under that level. Do so, and you can expect to see an increase in your credit score in a very short time.

As an extra added benefit, owing less on your credit cards also means that it is less likely that you will have difficulty paying your monthly bills for those cards on time moving forward.

  1. Get and Fund a Secured Credit Card

Believe it or not, there are people out there who do not have a single credit score reporting, or alternatively, do not have a credit score reporting from one or two of the three credit reporting bureaus. These people don’t necessarily have a single item that is reporting negatively on their credit history, they are simply “credit invisible.”

Why are they invisible to the credit bureaus? Because they have never applied for nor utilized credit.

One of the easiest and best ways to become visible to the credit bureaus is to apply for and fund a “secured” credit card. Secured cards are guaranteed by a deposit that you make with the bank where you acquire the card. Your credit limit, typically, is equal to the amount that you fund the card with.

Secured credit cards can also help to build credit for individuals that aren’t “credit invisible”, but have damaged or low credit scores.

There are a wide variety of secured credit cards available, and the amount of money that you are required to fund those cards with varies widely, from a few hundred dollars to a few thousand dollars. The cost of these cards, in addition to the required deposit, can also vary widely, so shop around and be certain that you understand what you are paying for with this credit card.

If you obtain a secured card, it is crucially important that you use it properly in order to build your credit score. It is also important that the card you elect to obtain reports to the credit bureaus as often as possible.

  1. Pay Off Accounts that are in Collection

How nice would it be to stop that annoying collection agency from calling you about some old bill that you were unable to pay several years ago? Getting those calls to stop is another great way to use your tax refund, by paying off or settling those obligations. It may also help to boost your credit score.

Be careful when dealing with old debts, as sometimes paying them off can retrigger statutes of limitations that might be about to expire. Statutes of limitations are the time period, set by state law, for which a creditor can sue in court for an unpaid debt. They vary from state to state, so be sure that you know the applicable limitations for your state. By partially paying a debt or entering into a payment plan, it’s possible that you may ‘restart’ the statute of limitations all over, even if the debt has been previously barred by the expiration of said time limitations.

You also need to be aware of the time limits for how long a collection account can legally be reported on your credit history. The Fair Credit Reporting Act, a Federal law, only allows collection accounts to be reported for seven and one half years (technically, it’s seven years plus 180 days, but we’ll round down slightly for our discussion here).  This restriction is different than the statute of limitations. Depending upon the state law that applies, it may be longer or shorter than the time within which a creditor can sue you.

If an account is nearly seven and a half years old, paying it off may not be the best use of your tax refund, at least when it comes to boosting your credit score. That money may likely be better spent elsewhere.  Be sure to look at how long a collection has been reporting.

Generally, whether you pay an account in full or enter into an agreement with the collection agency to settle the account for less, doesn’t make a difference in your credit score. Accordingly, feel free to try out the negotiating skills you have learned from watching “Shark Tank” when you place a call to the collection agency.

Finally, be aware that paying off an old account doesn’t necessarily mean that it will be removed from your credit report. Some credit scoring models will boost your score for paying off these types of debt, but most of them don’t.

  1. Hire a Qualified Professional Credit Restoration Company

You can attempt to fix damaged credit issues on your own. You can also attempt to change your own oil in your car and cut your own hair – in other words, because you can, doesn’t necessarily mean that it is something that you will want to undertake on your own. The process can be hard work. It will require your time, patience, diligence and perhaps some aptitude for understanding what the credit bureaus and collection agencies are required by law to do.

Instead, you may want to consider spending your tax refund on a professional, reputable credit restoration company to help you along the path to better credit. A well-qualified credit restoration company will provide you with important guidance as to how to address negative items that appear on your credit report, help you to maximize your credit utilization, teach you how to acquire and properly utilize a secured credit card, and help you with negotiating collection accounts.

Due Diligence is important if you choose to spend your refund on a credit restoration company. Research the company that you are considering and ask them how the work of restoring your credit gets done, and who does it. Look for a company that employs credit experts who are educated about credit and who will provide you with personal service. There are credit repair companies out there who do nothing more than sign you up for their services and then ship you off to a third-party service provider that does little more than repeatedly send out form letters to the credit bureaus.

Good luck getting those companies to pick up the phone and answer your questions about the status of your file after they sign you up. More than likely, they will have “to get back to you” after they send an email to their contractor thousands of miles away.

So, leave the home improvement projects and luxurious weekend getaways for next year. Give yourself the gift of a higher credit score. It’s a gift that keeps giving, throughout the year.

 

How Your Credit Impacts What You Pay For Insurance

Did you know that the cost of the liability insurance that you purchase to protect you in the operation of your auto and in the ownership of your home is determined in significant part by your credit score? That’s right, that credit history that you thought only mattered when you borrowed money for a loan or mortgage, is a big factor used by insurance carriers in determining the premium pricing that they offer to their customers.
Insurance carriers use something called a “credit-based insurance score” to determine the price that they will charge you for coverage, as well as whether or not they will offer coverage to you at all.  Insurance companies believe that the worse your credit history is, the more likely you are to cause a claim to be made against the coverage they offer you.  Obviously, insurance companies look at items in addition to your credit history in pricing your coverage:  If you have a history of claims being made against your coverage or a disregard for traffic laws, your liability insurance is also going to cost you more than it otherwise would.

 

Are Your Insurance Score and Your Credit Score the same thing?

No. A credit score is used by lenders to forecast your ability to repay money that you have borrowed from them. When you apply for a mortgage, for example, the credit score that they use is specifically designed to determine the likelihood that you will repay that loan in a timely fashion.

An insurance score, on the other hand, is used by insurance companies to predict how likely a customer is to have an insurance loss.  Although the two scores are different, your credit score is one of, if not the biggest, factors in the calculation of your insurance score.

 

What type of transactions in my credit history can affect my Insurance Score?

Insurance companies don’t disclose the scoring models that they use in determining an Insurance Score. They consider these formulas to be proprietary, trade secrets.  Nonetheless, since we know that an Insurance Score is based in large part on a credit score, we can reasonably infer the items that are utilized in determining this score:  Late payments, judgments, collections and other items which negatively impact your credit score have the same negative impact on your insurance score.

 

A higher insurance score means higher insurance premiums, what can I do to change that?

The first step is to obtain a current and complete copy of your credit report. There are a number of ways to do this. By law, you are entitled to a free copy of your credit report once a year (like at https://www.annualcreditreport.com/index.action).  Be certain that the report you obtain has information from all three of the credit bureaus (Experian, Transunion and Equifax). There’s a chance that something is being negatively reported on one of those three, but not on the other two.

 

You can attempt to fix damaged credit issues on your own. The process involves researching, drafting and sending verification letters to all three bureaus; following up with those bureaus and perhaps eventually, negotiating with creditors or their representatives. The process will require your time, patience, diligence and some aptitude for understanding what the credit bureaus and collection agencies are required by law to do.

Alternatively, you may want to consider enlisting the help of a reputable, professional credit restoration company. Those experts can help you obtain a copy of your credit report and further, help you to decipher and understand the information contained in that report.

A good credit restoration company will provide you with important guidance as to how to address negative items that appear on your credit report and get you started on the road to a better credit score, a better insurance score and significant savings on your auto and homeowner’s liability insurance premiums. In many instances, the savings realized from those lower premiums might more than offset the cost of professional credit restoration services.

You need to take a serious look at how your credit is impacting your life. Restoring it can make a significant difference to your household’s wealth.

 

The Shamrock and your Credit Score

 

The “wearing of the green” is a customary part of the celebration of St Patrick’s Day. A look around your workplace today will likely reveal many of your co-workers sporting green clothing and accessories. Both the clothing and accessories are likely to include shamrocks, one of the national symbols of Ireland.

St Patrick is said to have used the shamrock, a three-leaved young sprig of clover, to explain the concept of the Christian “Holy Trinity” to the (then) pagan Irish.

The shamrock is also useful in understanding how your credit score works. Your credit score is actually a “trinity” of credit scores, reported by a trinity of credit bureaus; Transunion, Equifax and Experian. (It’s a little-known fact that one of those bureaus, Experian, is actually an Irish Company, headquartered in Dublin, Ireland.)

Each of the three “leaves” of your credit score is different. This is because not all creditors report to all three of the bureaus, along with the fact that each of the three bureaus uses their own unique formula, or algorithm, to calculate your credit score. When it comes to applying for a loan, the leaf of your credit score which is most important is the middle one. Lending institutions throw out your high score and your low score and focus on the one in the middle. This mid-score is a major factor in determining whether you obtain financing or not.

Why do lenders single out the middle score? You would think that all three credit scores, even if different, would be very close to each other. Guess what? They’re not! It is not uncommon for us to see credit reports with huge differences in the scores that are reported by the three credit bureaus; sometimes the differences are as high as 75 to 80 points! It is also not uncommon for us to see derogatory items on a credit report like a tax lien or an unpaid  court judgment being reported by one of the credit bureaus, but not the other two.

Lenders know that the information that is being reported by the bureaus contains inaccuracies and deficiencies. By using the middle score, they get rid of the report (the high score) that has likely missed something which could be negatively impacting your credit, and they get rid of the report (the low score) which has likely included a negative item that is inaccurate or doesn’t belong to you.

Sad, but true. They don’t use an average or a mean to determine your true credit score because throwing out the high score and the low score provides a method for weeding out inaccurate information – inaccurate information on the one hand that may boost your score, and inaccurate information on the other hand that may depress your score.  Seems like a lot of “blarney” doesn’t it?!

As they say in Ireland’s native Gaelic language, “Beannachtai na Feile Padraig oraibh!” (“Saint Patrick’s Day blessing upon you!”)

Saint Patrick’s Day Blessing upon you, and your credit score! Enjoy the green beer later today!

 

Does a loan officer have a duty to disclose receipt of a “referral fee” from a credit repair company?

Some credit repair companies obtain their customers by paying “referral fees” to loan officers who have turned those customers down for a loan.
By necessity, a credit repair company passes those fees on to their credit repair clients. That’s how business works.
That creates a potential pitfall for a referring loan officer. They, and by extension, the company that they work for are receiving “income” for that referral. That is why the credit repair company that paid them a referral fee last year probably sent them an IRS Form 1099 for that payment this past January.
Does the Real Estate Settlement Procedures Act, (Title 24 CFR section 3500 et seq.) require that you disclose that income to your mortgage loan customer, should the credit repair company properly return them to you ready for a mortgage?

Think about it…

If a loan officer is sending someone to a specific credit repair firm, and:

1. Telling them that they “need” to have a higher credit score in order to qualify for a mortgage loan, and
2. The cost of that credit repair service is higher for them because of the fact that the loan officer and or his company were paid a “referral” fee
-Is that cost fully and accurately disclosed to the customer in the loan settlement documents?

In effect, isn’t the customer paying more to obtain a loan than they would have had the loan officer not received a referral fee?

In the interest of “full disclosure”, should that referral fee  be reflected on the Settlement Statement ( HUD-1)?

 

 

Why Would a Mortgage Loan Officer Do Credit Repair?

The latest blog post from the president of Phoenix Credit Consultants:

This weekend, I read a “LinkedIn” article written by an old friend who is in the investment capital business. In it, she talked about a client of hers who ran a carpet cleaning business. In this carpet cleaning business, the owner “did it all”, it was him and his carpet cleaning truck, hustling from job to job, pausing where necessary to answer his cellphone, to book appointments for existing customers or to sell his business to new customers.

Anyway, the carpet cleaning businessman had an accident and broke his leg. He was forced to hire someone else to cover the appointments that he had booked while he recovered. During his convalescence, he was able to devote his time to marketing his company properly and his business grew. He found that he had been spending his precious time working “IN” his business, instead of “ON” his business. Oh yeah, by the way, the carpet cleaning guy was calling the investment capital firm to talk about financing for additional carpet cleaning trucks and equipment – his business was growing.

After reading this article, I started to think about the mortgage loan officers that the credit restoration company I work for deals with every day. I often encounter loan officers that say, “Credit Repair? Oh, I do that myself.”

I have often wondered, why would a loan officer choose to do this additional work? This additional work, mind you, for which they don’t receive any additional compensation.

I have been able to formulate 3 reasons, in my mind, why they do this:

1. They don’t trust Credit Repair Firms:

Many loan officers have been ‘burned’ by credit repair firms. They have referred their customer to a credit repair company which represented that they knew what they were doing. The credit repair company took the customer’s money and never did the work. Or, worse yet, the credit repair company did the work, but steered the client towards another mortgage brokerage. (Here’s a tip: Always do your due diligence. There is, at least, one local credit repair company that a local mortgage company has an ownership interest in. No, it’s not Phoenix Credit Consultants.)

2. They think that the work is easy, that it speeds the process up if they do the work themselves:

Loan officers have access to software like “Credit Expert” that analyzes a client’s credit report and makes suggestions as to a score increase that might be achieved if a client takes certain steps, like paying down existing accounts.

Sometimes, the work that needs to be done is “easy.” Oftentimes, a client who is referred to us who simply needs to pay down the balances on existing accounts. In those instances, we often explain to the client what they need to do, without charging them a cent.

But why would a loan officer spend their precious time doing this work, especially when there is a trusted alternative that will do the work for them?

Reputable, trusted credit repair companies do exist. (Again, do your due diligence.) These companies do the work that the loan officer is doing for them, at absolutely no cost to the loan officer or his company.

3.  They are concerned that the “cost” of credit repair will keep their customer from being able to close on a loan:

Many customers who shop for mortgages have saved ‘just enough’ for a down payment and the costs associated with a loan. Many loan officers surmise that if the borrower takes on the additional burden of paying for credit repair, they aren’t going to be able to have the funds to proceed with the loan when they complete the process of repairing their credit. They conclude that if they themselves help the client with the credit repair, they will save the client the money they need to close on the loan.

Here’s what they miss: Professional credit repair, properly done, doesn’t cost…It pays.

When a mortgage client’s credit is repaired properly, they will not only qualify for a mortgage (perhaps even for a better, cheaper mortgage), but they will also save on their homeowner’s and auto liability insurance premiums. More importantly, those customers who have ‘just enough’ for a down payment and the costs of a loan, are the customers who are the most likely to be required to have PMI – the savings on that insurance alone will most likely more than offset the cost of credit repair.

So, think about it. Are you spending time working “IN” your business that you could more effectively spend working “ON” your business? Does it really make sense for you to contribute your free sweat equity towards the cost of your client’s new home?

Your Rights Regarding the Reporting of Your Credit

The Fair Credit Reporting Act was enacted by Congress in October 1970. It was designed to provide protection for consumers against abuses from the credit reporting companies. (There are three big national companies: Equifax, Transunion and Experian.)

One of the purposes of the law was to level the playing field between consumers and the credit reporting companies.

Under the law, credit reporting companies, or “Bureaus” as they are called in the lending industry, are required to follow certain rules and fix mistakes contained in the credit reports that they create.
The law also creates certain remedies, including the right to sue for damages, if the bureaus don’t do what they are supposed to.
Here are four things that everyone should know about the Fair Credit Reporting Act (FCRA):

 

1. You have the right to know the information contained in your credit report.

 

The act requires credit reporting agencies to give you FREE access to the information they have collected about you once every 12 months.
You can obtain these reports either by writing to each of the individual credit bureaus or on the internet at AnnualCreditReport.com.
2. If there is an error on a report, there are steps you can take to fix it.

 

You have the right to dispute information contained in your credit report if that information is not accurate.

The FCRA requires that credit reporting agencies have reasonable procedures in place that that ensure the accuracy of the information that they report.

That being said, errors can, and do, show up on people’s credit reports.
When a credit bureau is made aware of a potential error, the law requires that they conduct an investigation.

The law says that a credit bureau has 30 days to look into your dispute, based on the information you provide to it.

If the dispute is not verified within 30 days, then that individual bureau is required to delete that item from the credit report.

If you have properly disputed an inaccurate item on your credit report and the bureau refuses to take action, you should consult a lawyer. The FCRA gives you the right, under proper circumstances, to seek appropriate remedies in a court of law, including damages and attorney’s fees.
3. Negative information on your credit report is subject to a time limit.

 

You don’t have a right to dispute negative information on your credit report that is accurate, and is being accurately reported.
That information cannot, however, be reported forever. The FCRA provides that even accurately reported negative information may only be reported by the bureaus for seven years.

This rule does not apply to bankruptcies, they can be reported for up to 10 years.
4. You have the right to know if you have been denied credit or charged a higher
interest rate as a result of information that is contained in your credit report.

 

Creditors and employers are also required by the FCRA to tell you if these things happen. This part of the law is there so that you are alerted to potential problems in your report. It is up to you to investigate this information and dispute it if it is inaccurate.