Good manners mean good business
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Good manners mean good business

March 28, 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 sherene@creditconsultants.net.

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