Improve your client's credit scores and reclaim dead filesSherene Costanzocredit restoration, debt management, credit scores Do you ever wonder what happens to those dead files you throw to the side because the potential client does not qualify for a loan due to a low credit score? Are those potential clients ever financed? Was there any way you could benefit from those files you tossed aside? The client only needed a few more points! An individuals credit score is a significant ingredient when financing a home. A person can improve their credit rating in several ways. Of course, this wont happen overnight, but it can be done in as little as 30 days, and unlike re-scoring, no proof is required. The client can go through the credit restoration process, a process that can be handled by a credit restoration company. For most clients, this process can be time-consuming as well as confusing. In that case, using a credit restoration company would be extremely beneficial to them. The consumer is protected under the Fair Credit Reporting Act, a law that states the consumer has the right to question any unverifiable, inaccurate or erroneous information reported on their credit file with any of the three major credit bureaus (Equifax, Experian, TransUnion). This includes: collections, late payments, charge-offs, judgments, tax liens, foreclosures, garnishments and bankruptcies. The credit bureaus have 30 days to verify the account in question with the original creditor. If the original creditor does not verify the account within 30 days, the item or late payments must be corrected or deleted from the consumer's credit file. At this point, the score will be adjusted immediately with the three major credit bureaus. The mysterious credit score The credit scoring system became popular in the 1980s to aid lenders with measuring the risk associated with a borrower. Twenty years later, the scoring system remains strong among the home lending industry. The score can fluctuate daily and can affect a borrower's interest rate or determine whether they qualify for the loan at all. The Equal Credit Opportunity Act protects consumers from discrimination when it comes to credit scoring. Scoring models are prohibited from using factors, such as race, sex, marital status, nationality or religion. Although the score appears mysterious, it is actually a complex mathematical formula of several factors that analyzes an individuals credit report. In most credit scoring models used, these factors are assigned a weight that measures how significant they are in predicting credit-worthiness and risk to the lender. Knowing what these factors are is the first step to improving an individual's credit rating. These include credit history, payment history, account balances and amount of debt outstanding, number and types of accounts established, derogatory accounts, and inquiries for new credit. Next, it is important to determine which of these factors may be impacting the score. There are several ways that a client can improve these categories. Positively changing these factors will trigger the score to increase. It is practically impossible to determine how much one specific action will affect the score. The credit score is based solely on the information contained in an individual's credit report. A change of one factor can influence the score, however, the amount of impact depends on how it relates to other factors and 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 a person who has just recently established credit, only has five accounts total and all five accounts reporting late. The key is to change the factors that help increase the score, which in turn, will increase the chances of boosting the score. However, it is extremely important to remember that building a good credit history over time by paying bills on time, having a variety of accounts established and keeping your balances below 40 percent of your credit limits, is your best assurance to having and maintaining excellent credit. Benefits to the loan officer How can this process benefit you as a loan officer? Its very simple! Instead of tossing these files to the side, make them potential clients by referring them to a reputable credit restoration company. Make sure to follow up with them; this will assure that they will come to you when they are ready for financing. There is no guarantee you will close a loan with any person, but with a minimal amount of effort you can set potential clients on the path to credit repair. The more you refer, the more chances you have of gaining new clients. Just do the math! For example, you average a commission of $1,000 per loan. If you refer 10 people per month to a credit restoration company and five of them close a loan with you, that is five extra loans a month. You can earn an extra $5,000 per month. Its just that simple! As with any business, it is very important to use a reputable company that you know provides excellent service, is honest, loyal, reliable and trustworthy. Sherene Costanzo is vice president of Credit Consultants Inc. She can be contacted by phone at (888) 522-7007 or e-mail [email protected].