| It's Never Too Late to Improve Credit Scores
By Linda Ferrari
President, Credit Resource Corp.
 Many of my clients come to me for assistance in cleaning up damaged credit scores even though they already own a home. They know that improving their credit scores will save them money on many things such as car insurance, automotive loans, or any other type of loan. But this is also something to keep in mind when it’s time to refinance a home loan, because higher credit scores will always work in the borrower’s favor. The goal is to secure the best interest rate available and save money... It’s that simple.
If a consumer had credit issues in the past but still managed to qualify for a home loan, most likely that borrower took on a loan with a higher interest rate because of the low credit scores. But if you have a borrower who feels as though they're stuck in a “sub-prime” loan, you shouldn’t give up the battle.
You should also refer to your client database and run a report to see how many of your clients have a pre-payment penalty that is due to expire. Six months prior to that expiration, let them know they are eligible for a refinance soon and should be working on improving their credit score to get a better interest rate.
I advise the mortgage consultants that network with CRC to advise their borrowers to follow our three basic rules to evaluate credit scores and initiate the clean-up process. Step 1: Tell Your Borrower to Order Credit Reports and Scores - Order credit reports and scores from all three national credit bureaus, TransUnion, Equifax and Experian.
- The borrower should pull their own reports so they don't lose points for hard inquiries. The loan officer can pull reports when the borrower is ready to put their loan in process.
- All three credit reports and scores can be obtained for $1.00 at www.privacyguard.com. Be sure to read the terms and conditions of the Agreement. Depending on where the borrower lives in theUnited States, free credit reports can be obtained through www.annualcreditreport.com.
Step 2: Verify the Data Being Reported It is the consumer's responsibility to verify that the data being reported to credit bureaus is accurate. Some examples of what to look for are as follows: - Misspelled names.
- Wrong addresses.
- Incorrect Social Security information.
- Make sure you recognize all creditors being reported.
- Make sure the negative items belong to you.
- Look for signs of identity theft.
- Check for unauthorized hard inquiries.
- Make sure all credit card limits and balances are reported accurately.
- Check the statute of limitations in your state and see if some derogatory items should be removed.
- If you have made payments on an account that is not being reported to all three bureaus, call the bureaus and ask them to report the positive accounts that are missing.
Step 3: Dispute Inaccuracies Immediately - Send letters of dispute to the credit bureaus to have errors on your credit reports corrected.
- Send copies of the letters to creditors who are reporting the inaccurate information.
- By law, the credit bureaus have 30 days to investigate claims and make any appropriate updates.
If a borrower doesn’t have the time or stamina to do their homework and get the ball rolling, then it's time to team up with Credit Resource Corp. We are staffed and ready to meet your client’s needs.
Likewise, when we have consumers who need a loan originator to help them, we are checking our database to locate a loan officer in their region who is already affiliated with our program. Our commitment is to help consumers become more educated about how the credit scoring process, and get the best interest rate they possibly can by working with a member of our referral network. QUESTION: I have too many unused credit cards. If I'm not supposed to close these accounts, what should I do with them? Closing them will hurt my FICO score, but I have no balances on these extra cards.
ANSWER: We suggest that if you feel that you have to close cards, don't do it during the loan process. In fact, you shouldn't take any action that would have an adverse affect on your credit score once your loan package is sent to the lender for review.
Don't close cards that have balances remaining. This raises a red flag to the scoring system, and it senses you could be in financial trouble. If you have to close some accounts after the loan process is completed, only close the newer credit card accounts. You'll keep the good points for credit history from the older cards.
If your score is above 680, having too many credit cards really doesn't affect you as much as if your score was below 680. When you have a high score, you've already proven that you're responsible with managing your credit.
If you are just establishing credit (under two years), it's best to have two to three credit cards and make all payments on time. |
