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Good manners mean good business

National Mortgage Professional
Mar 29, 2007

There is hope for clients with credit issuesSherene Costanzocredit scores, credit restoriation, debt management/settlment There are several companies out there advertising that they can help people with credit problems, but they provide different types of service. How can you distinguish them? It is important for you to understand the differences in these credit companies so that you can steer your clients or prospects with low credit scores in the right direction. You have probably heard of credit restoration companies and debt management/settlement companies. Credit restoration companies are different from debt management companies. Credit restoration companies focus on raising the credit score, while debt management companies focus on helping consumers pay off their debts, usually over a five-year period. A credit restoration company does not focus on managing debt or paying off bills. The main focus of a credit restoration company is to increase individuals' credit scores, as well as their credit behaviors, in order to improve and maintain their scores indefinitely. A credit restoration company may help increase individuals' scores within 30-90 days and enable them to qualify for the loans they need. However, it is extremely important for individuals to be educated regarding their credit and improve their credit behaviors. Many credit restoration companies will implement education on credit behavior for their clients. In other words, by using a credit restoration program, clients will benefit from an improved score, as well as gain knowledge about obtaining and maintaining excellent credit. It is somewhat of an educational course that should be required in high school and college. Eighty percent of Americans would be in a better position now had they taken Credit 101 during their school days, but instead, students are being bombarded by credit offers from every angle. It is beneficial for anyone with a low credit score to take advantage of what a credit restoration company can offer. Credit restoration companies are also great tools for loan officers to use when the client's score just does not fit the puzzle. Credit restoration companies rely on the Fair Credit Reporting Act (FCRA) to assist consumers in increasing their credit scores. The FCRA dictates that the consumer has the right to question any unverifiable, inaccurate or erroneous information reported in his 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 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 hire a lawyer to go to court for them. 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. With the help of a credit restoration company, you may be able to close a few extra loans each month. Just remember that when you are considering a credit restoration company, make sure it is a reputable one that will not only improve your client's credit score, but also educate him on how to maintain and further improve that score in the future. A debt management company, also known as a debt consolidation or debt settlement company, helps individuals who are currently buried in debt and cannot seem to dig themselves out. The hole seems to be getting deeper and deeper. The late payments and interest payments are stacking up higher and higher. This is when a debt management/settlement company may be helpful. Keep in mind, however, that a debt management company may help bring an individual's bills under control, but it will not help improve an individual's credit score and may even make the score worse. Once the debts are paid off, improved credit behaviors over several years will gradually help increase the score, but in the short term, negative marks will appear on the individual's credit report, and they won't be expunged for seven years from the date of last activity of each delinquent debt paid. This makes it difficult to be approved for new credit in the near future. So make sure debt management is your customer's last resort before allowing it to destroy his credit rating. As with every business, it is important to shop around for a credible debt management company. Be sure to do your research before settling for one. If an individual's outstanding debt is considerably high, he might want to consider speaking to a bankruptcy attorney before signing on with a debt management company. The attorney will then be able to determine which alternative is best for the situation at hand. However, avoiding these alternatives, if at all possible, is most beneficial to an individual's credit rating. Sherene Costanzo is vice president of Credit Consultants Inc. She may be reached at (888) 522-7007 or e-mail
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