Credit restoration benefits loan officersSherene CostanzoCredit, credit restoration, credit repair
A low credit score can be a loan officer's biggest frustration
when trying to create the best loan to suit his or her client.
However, when the score just does not fit the puzzle, there are
options. Credit restoration companies provide one option that may
allow originators to save themselves frustration and better spend
their time preparing loans for other clients with sufficient
scores. Loan officers can even benefit from using credit
restoration in their marketing strategy.
How does credit restoration work?
Credit restoration companies, which should be distinguished from
debt management/negotiation companies, rely on the Fair Credit
Reporting Act (FCRA) to assist consumers in increasing their credit
scores. The FCRA provides that the consumer has the right to
question any unverifiable, inaccurate or erroneous information
reported in their credit file with any of the three major credit
bureaus. This information may include reporting about collections,
late payments, charge-offs, judgments, tax liens, foreclosures,
garnishments and bankruptcies.
Once the credit bureaus are notified of a disputed item on a
consumer's report, they have 30 days from the date they are
notified of a dispute to verify the item(s) in question with the
original creditor. If the original creditor does not verify the
account within that time, the delinquent account or late payment
must be corrected or deleted from the credit file. At this point,
the score will adjust immediately with the three major credit
bureaus.
Although consumers can and frequently do choose to dispute and work
toward correcting inaccurate information on their own, the process
can be very confusing and time consuming. Credit restoration
companies present another convenient option, just as people can
file their own taxes but may choose to pay an accountant to provide
the service.
In addition to communicating with the bureaus regarding the
disputed items, some credit restoration companies also consult with
clients on how to obtain and maintain good credit. Also, some
companies may help consumers settle accounts that are not removed
during the process.
Who is a typical candidate for credit
restoration?
Typically, a candidate for credit restoration has a credit score
below 640 and has negative information recorded in their credit
reports. Many clients are in the process of making a major
purchase, such as a home or a car. Some may be looking to refinance
or take out a loan for home improvements. Regardless of their
purchasing goals, good candidates are willing to work toward the
goal of improving their credit.
Deciding to use a credit restoration company is a great idea, as
the efficiency and experience that the company brings to the
process can be of considerable help. However, as with any business,
it is important to choose a reputable company that provides
excellent service and is honest and reliable. Many credit
restoration companies advertise directly to consumers via the
Internet, newspaper or mailings, while others market to industries
that utilize the credit score, such as loan originators, real
estate agents and car salesmen. When selecting a credit restoration
company, choosing a reputable company with an established track
record that is referred by a reliable source is typically a better
option than selecting a company based upon its direct
advertising.
Whats the cost and how long does it take?
The average fee for credit restoration is around $400, though some
companies charge as little as $250 or as much as $800. Be cautious
of the companies that charge higher fees because you can basically
receive the same service for a lower fee. Also, beware of those
companies that may charge monthly fees and drag the process out
over a year. Since the credit restoration process can be completed
within 90 days, there is no reason to pay a company for a year or
more when the same process should be completed for a single fee in
three months or less. Do-it-yourself credit restoration kits are
also an option for consumers, though many clients do not have the
time or patience to see the process through on their own.
How effective is the process?
Credit restoration is extremely effective, although it is
practically impossible to determine how much one specific action
may affect a consumer's credit score. A change of one factor can
impact the score, though the degree of that impact depends upon how
it relates to other factors and the history included in the report.
For example, a person with a long credit history and several
positive accounts will be affected less by five late payments than
will a person who has just recently established credit and has only
five accounts total, with all five accounts reporting late.
The key to credit restoration is to correct those factors that will
most likely boost the client's credit score. However, it is the
client's responsibility to remember that building a good credit
history over time--by paying bills promptly, having a variety of
accounts established, and keeping balances below 40 percent of the
credit limits--is the best strategy for having and maintaining
excellent credit. For this reason, it is impossible and inadvisable
for any credit restoration company to guarantee clients that their
credit score will improve, though in most cases it will.
Benefits to loan officers
How can the credit restoration process benefit you as a loan
officer? It is very simple: The process can help turn prospects
with low credit scores into clients with a complete, reliable
credit report that accurately reflects their credit
worthiness.
Instead of tossing the files of prospects with dismal credit
scores, consider referring them to a reputable credit restoration
company. Make sure to follow up with the prospects, which will help
ensure that they will come to you when they are ready for
financing.
You may even consider using credit restoration in your marketing
strategies. There are several ways you can gain clients if you
offer to help them with their credit. You may include credit
restoration in every deal you close. That way you can plan to
refinance the client in a year or when the credit score is
higher.
The success rate of credit restoration is exceptional; however,
when using a credit restoration company, cooperation from the
consumer is important. Consumers should know that increases in
their credit score cannot be guaranteed, and credit improvement
takes time. An educated consumer is the single greatest key to the
credit restoration process and, of course, to successful
borrowing.
Sherene Costanzo is vice president of Credit Consultants
Inc. She may be reached at (888) 522-7007 or e-mail
[email protected].
