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INTERESTED IN BUYING A HOME? Fact is, you may not be able to play today if you didn't pay yesterday!

INTERESTED IN BUYING A HOME? Fact is, you may not be able to play today if you didn't pay yesterday!

A GOOD CREDIT RATING IS A CONSUMER'S MOST VALUABLE ASSET. The Tax Credit and low interest rates have inspired many folks to consider buying buying a home who never seriously considered that alternative to renting. After all, it's the thing to do these days. Or is it??

Fact is, you can't play if you didn't pay. . . OR, until you pay.

Inspired by a timely post by Ellen & Doc Stephens about credit repair, I suspect that many ActiveRain agents and loan officers have had contacts from consumers who want to buy, but are just simply not credit worthy. Hardly a day goes by that I do not receive a phone call from a consumer who has paid $Thousands of Dollars to a "credit repair" company only to find that their credit has not improved.

Working with a competent loan officer who will tell folks what they really need to do to be able to qualify for a mortgage loan is the best way. Credit Repair Or, if they really need the structure of a service to manage their money, consider. . . .

CONSUMER CREDIT COUNSELING. If it's really out of the consumer's hands, CCC is the only way to go. They are non-profit and a mortgage loan can be obtained with CCC as a credit reference.

Folks just have to understand that bad credit didn't happen to them, they made it happen. They have to clean it up.

Many folks have filed a Chapter 7 bankruptcy in past years to liquidate their bad debt. Sadly, their credit report shows late payments in the past 6 months. WHAT?????

AFTER BANKRUPTCY. Yes, you can obtain a mortgage loan after bankruptcy. 2-4 years following discharge, a consumer can obtain a mortgage loan IF, THEY HAVE. . .

Established new credit
Made payments on time
Have no late payments
Qualify for the payment
Write a good explanation for the cause of the bankruptcy
More depending on your individual cause of the bankruptcy.

No, it isn't automatic. If you have damaged your credit in the past, you will have to earn the ability to obtain a mortgage loan. Folks who filed bankruptcy because of medical expenses will find it easier than folks with discharged consumer credit debt.

If you sold your home through a short sale in the past year, it is unlikely that you'll be able to get a mortgage loan today. I have received several calls with this scenario, often within months of a Short Sale. Not likely to happen.

WHAT TO DO.

Stay out of the mall.
Make credit card and other payments when they come in the mail, not a day before the due date.
Don't shop for automobiles while considering buying a home.
Don't co-sign for anything for anyone.
Develop a plan for saving that extra money rather than spending it.
Stay out of the mall.

GOOD LUCK!! There can be a wonderful home owning experience in your future.

ONLY YOU CAN MAKE IT HAPPEN.

Home Buyers

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988. Helping home buyers in Maryland and Northern Virginia. .

To Search for Homes for Sale in Maryland and Northern Virginia, visit our HOMESDATABASE site for buyers who would like to tour the real estate listings on line with photos, prices, descriptions and features.

WE CAN HELP! Ask about the Homefinders.com FREE One Year Home Warranty for all Leesburg home buyers

Posted by Lenn Harley, Real Estate Broker, Maryland & Virginia on 10/17/2009 08:07 AM

Comments (84)

Credit Repair in the Mortgage / Finance Channel

credit repair

Originally posted at: MD, VA Foreclosures, First Time Buyers Grants, CDA Loans MD, Rehab Loans MD & VA: INTERESTED IN BUYING A HOME? Fact is, you may not be able to play today if you didn't pay yesterday!

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84 Comments on INTERESTED IN BUYING A HOME? Fact is, you may not be able to play today if you didn't pay yesterday!

OCT

Featured @ Club Chaos

C. Thanks.

Lenn, you are very welcome. I'm sending links to this to a few people right now. :-)

Hi Lenn! SOUND advice--I have some first-timers who were completely stunned by their credit scores and are in repair mode right now. They won't be able to partake in the $8,000 incentive because they 'messed up' in college--not making that $35 monthly credit card bill (that they didn't need in the first place) has cost them at least $8K. Not to mention the cost of getting a great 2009 deal on a home and at an interest rate (that are at all-time lows right now)!

And, I agree--STAY OUT OF THE MALL!

I've had would be first time buyers recently with 20% to put down, but had many late pays. What?? I am amazed at how credit is not emphasized in school (or by some parents) when it is critical to your everyday life. Very good advice, thank you.

It has been far to easy to ruin credit with the mentality that many have about using credit, the ease of getting it in the first place, and our overall consumerism. And with the difficulties many have had with job loss and other factors impacting their income, living on credit has been the only way some could survive.

Some valuable points here about taking responsbility to fix your credit problem, sooner rather than later, especially since the requirements for getting loans are getting more stringent.

Jeff

Lynn

We are discovering daily the rules are changing along with the interpretation of credit. You make an excellent presentation of the overall details consumers are faced with. I have had a few with unbelievably good scores still run into "system " idiosyncrasies and bureaucratic brick walls. Nevertheless we have to work with the system.

Lenn, this has some interesting information most people don't know or think about, especially the late payments part AFTER bankruptcy. I remember you posting for us real estate agents to "stay out of the mall" earlier this year. It applies all across the board.

As far as Trey's comment - what about us self-employed, independent contractors with good credit who make our payments and run into a brick well when we want a loan today?

Lenn,

Very powerful message to those who think they can just "walk away" from their obligations without any ramifications.

Powerful message to agents too to make sure they're not chasing a hope and a dream, instead of a qualified client.

Rich

Thanks Lenn, Fabulous information as always, Keep up the good work. I look forward to your blogs.

Take care and happy Saturday.

Lenn: Thank you for addressing the so very important topic of credit scores. As a lender, I can't begin to tell you the wide variety of issues and stories I have heard revolving around this sensitive topic. You are totally right, many of the issues are self-made. Those are issues that need to be addressed not only with cleaning up scores, but cleaning up attitudes. Many times these people just don't seem to understand there are now consequences for their actions ... or should I say NON-actions. The borrowing game has totally different rules now.

There is also a large and growing segment that I am seeing extremely often. The debts that are showing on the credit reports surround non-payment of medical bills. It is a huge problem for so many. Much harder to address, for sure ... and my heart goes out to them.

One of your commentors mentioned the young people. She was so right about the need for parental supervision and rules regarding credit and budgets. All too often credit problems I see started when young and in school. Once you've established poor spending habits and you're in credit trouble, it is hard to dig your way out. Best remedy? Never get in that position in the first place. For that, parents need to step-up and take an active role.

Again, thank you so much for broaching this sensitive issue. The importance cannot be overstated!

Gene

Lenn...It is common place for buyers to come to me and say "We would like to buy a home but have a bad credit history...what can we do?". The Answer is get used to putting off immediate gratification, yes that right. You probably wouldn't be able to buy right away, but starting down the right path now will have long term benefits with improved credit. You can decide what the hell I'll keep renting and living the way I'm used to or you can do something about it...that will have long term positive result, isn't it time to be a grown up?

Lenn: This all seems so simple to me ... be responsible, pay obligations on time, live within our financial means, etc. Yet, so many people just spend like there will be no tomorrow. It takes desire and discipline to change the habit of over-spending ... not unlike breaking any habit ... over-eating, drinking, etc. Thanks for your post ... lots of great info!

Lenn, Like Kathleen says, it sounds simple, but then why are there so many people who let their scores go down the drain?

I had a seller purchasing a new home recently who had 800+ credit scores. Only God knows why, but he was late on a mortgage payment while we were listing his house. He had the $ but just paid late!!?? After he sold his home, he almost wasn't able to get a loan on his new home due to the late payment. That was a shock!

If you want to "play" as you say then you must pay forward on your credit scores. Good stuff.

Lenn: Great post. Credit is such a mystery to home buyers, and it is really is rather cut and dried. If you are overextended, or have demonstrated trouble in paying bills on time, it really does hurt the chances of getting a loan.

Hi Lenn,

Your post hits home to many out there..I like your "you can't play if you didn't pay!" Many are learning the hard way but they can repair their credit report with discipline and staying out of the mall! Lessons in life can be hard.

"I had a credit card a while back, but it didn't work out."

"I think I had a bankruptcy a couple years ago." (it was the previous month)

"My husband and I had a house about 2 years ago, but we let that go back when our roommate moved out"

"I have the money to pay the [27] collections, I just didn't want it to mess up my credit."

"I don't understand why having 19 credit cards is a bad idea, I still have money left over at the end of the month!" (She had over $30,000 in credit card debt and unsecured loans with very little available credit.)

These are actual comments from folks I have spoken to over the last month after they found the "perfect house" on the internet.

The bottom line is education. These folks had no idea how the things they did affected their credit, much less how it will affect the possibility of them buying a home. We are working with them to help them become "mortgage ready"! It will take most of these folks from 6 months to a year to be ready to buy, if they follow our advice. Please don't drive them to see homes yet!!

Great post!

Good post! Sure would be nice if parents - and schools - taught young people the benefits of careful use of credit. And certainly hopeful buyers do well to check their own credit scores before even starting to see what mistakes or issues may be there. And ditto to your "stay out of the mall" (& don't watch the commercials that tell you all the things you "NEED"!!)

That's funny Bridget, I have heard some of the same lines recently. My objective is to turn them into buyers for next year, but it takes discipline and willingness to change habits on their parts. I recently had a colleague say the 580 isn't a credit score, it's a lifestyle. In some cases, unfortunately, she might be right.

Simon

Lenn, remember when lenders would hand them the money if they could simply "fog up a mirror?"

Boy, I do.

Seems to me that they have swung just as drastically in the other direction. Will we ever find middle ground?

lol,

Deb

I am wondering why they don't teach the credit responsibility in schools. Lack of education, plus artificially escalating consumerism, plus instant "benefits" of using credits and not making payments makes it so hard to "stay out of the mall". Lenn, this is an excellent advice to everyone who did not lose ability and reason to listen.

Lenn - Great points for anyone considering a home in the near future. I'm just finishing work on a book on home buying and this is the info you'll find in chapter 1, for it's critical to the next step. It's disheartening to see the huge numbers of people who just don't understand the relationship between financial responsibility and their future financial options.

Lenn...

Sound advice as always. It's not impossible to re-establish bad credit, but it takes discipline!

Lenn,

Folks just have to understand that bad credit didn't happen to them, they made it happen.

This resonates with some, and falls on deaf ears with others. With the deaf ones, 580 is a lifestyle.

Mike in Tucson

I'm with Carol up there. Don't even get me started on what should and should not be taught in school, however, I feel like all that history, geopgraphy, biology, etc should be middle school stuff. By high school, we should start teaching our kids the value of a dollar and how to use it to their advantage. Of course, parents could take part in this as well, however, with both parents having to work, it is often difficult. If this was something taught in school, just MAYBE we would have more responsible people who would HAVE good credit. Nice post

Lenn, I had a banker tell me a couple of months ago that if the consumer used a service such as CCC that it hurts their credit score. Is there any truth to this? I just can't see that it would hurt but only help the consumer get back up on their feet when they have fallen so far into debt but with a high interest rate it would have shoved them into bankruptcy.

Thanks for a great post.

Chris. Yes. Sometimes I believe that the percentage of home owners will never go beyone that 65% average simply because of the number of folks who cannot manage their money. Dorie. Getting in credit trouble is so easy. The cleaning it up is so hard.

Bridget. I've heard all of them. No, we don't want to take them to see homes. Buyers need to show that they're serious about getting a loan first.

Nancy. I agree. These are life skills that parents and schools should teach. For some reason.. . . .

Simon. Absolutely. I witnessed something like that when a buyer paid for his breakfast bun at McDonalds with a credit card. All that said to me is, mmmm, better get his credit checked before spending any more time with him. It was 8 months before he could buy.

Deb. Like most things, the reaction to a bad action is usually an over reaction. That's what the lending industry is engaged in now.

Svetlana. Thanks. Hopefully some consumers will run into this post.

John. Indeed. Just think of the homes we could sell if everyone had good credit habits.

Richard. Yes. discipline and time.

Mike. BINGO! I've seen that many times.

C. Thanks. You're on the job.

Debe. This is fundamental. This basic stuff needs to be drummed into students in 7th grade and by example by parents.

Carol. Indeed. I just wrote that. Basic budeting is just too boring for schools when they can be teaching political correction.

Jeff. Right, and they might as well get used to the idea that poor credit is going to cost them for a long time.

Tray. Right you are. Folks are sometimes stunned when they are rejected for mortgage loans at the best rates.

Frank and Sharon. All I can say is that I'm glad I got my most recent mortgage in 2005 with a fully documented loan. I doubt if I could today with the same or better credit scores and the same income range. Self employed is really tough.

Rich. Yep. Folks that just walk away will be handicapped for many years.

Kim. My pleasure. Just getting the word out.

Gene. Thanks. This subject is not at all sensitive for me. I speak with folks daily who believe, wrongly, that a few late payments here and there is not the cause of their low credit score. Most have consumer debt of much more than they should.

Too many folks just do not know how to pay for anything. That plastic is deadly.

Steve. Indeed. Many folks will be tenants for the rest of their lives because they just don't know how to handle money.

Kathleen. Yes. Folks with no discipline in one area often have the problem in many areas.

Dan. Thanks. I believe folks believe that once they establish good credit that they can let it slide. Wrong.

Kathleen Daniels (San Jose-Silicon Valley Real Estate (Intero San Jose Ca))

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10:01am • #13

I have been fortunate enough to be associated with a mortgage broker with 30 plus years experience. Without her repairing credit for my clients this would have been a really tough year. I can't tell you how many times I've had clients say they payed a credit repair service and were told by the credit repair service not to pay certain bills. This always resulted in further damage to their credit. I can't think of a single case where the credit repair company actually improved their credit.

Great post and advice! Love reading your posts......have clients that NEED to read it.

We have potential renters that come in and they have to fill out an application and we run their credit worthiness in a system. Many who are NOT credit worthy keep saying they are...and it'll show a recent bankruptcy or foreclosure or MANY credit cards not paid.

Your good credit is all you have (in the financial world)

Good one Lenn...great info to clean credit up...even after a bankruptcy.

Lenn - this should be required reading for many. Thanks for stating the obvious that gets stepped over - if you botched up your credit you have to "earn the ability to obtain a mortgage loan". Plain & simple.

They old saying CASH is King . . .true . . then CREDIT is Queen! Stay out of the mall -- LOL! Yup. And off the home shopping TV shows, and the Internet . . .

What ever happened to "Lay Away"

Lenn, well put! A good credit ratiing is soooo valuable. I love the directions you give to "stay out of the mall." ^_^

France and Mark. CCC is the only safe place.

Linda. Send them here.

Sally. It's absolutely essential. Even for folks who dont plan to buy a home save in credit fees, rates etc. when they make timely payments and don't abuse credit.

Lee and Pamela. Indeed. We have to tell them we can't help them UNTIL their credit is repaired.

Carla. Went out of style. However, I heard a radio show a couple of weeks ago about some large stores using it again. Can't remember who it was.

Maria. Thanks. That is fundamental.

Lenn, my credit is great except for one probel. The State of Oklahoma on taxes sent my notice that I was short in 2007 to an adress that was two addresses back for me. Despite the fact that they had my tax return with the correct address, they sent my $487 short payment to a credit collection. I am in the process of having an attorney friend deal with it. Sometimes I really can sympathize when people have problems beyond there control. FYI, malls give me hives.

Hi Lenn,

I've been around credit for a long time and didn't know about Fannie and Freddie's decision not to underwrite if tradelines show disputed. That will be a shocker to alot of people.

Thanks for the information!

Diane

Most people should AVOID consumer credit counseling programs! Mortgage lenders treat those programs as Chapter 13 bankruptcies. I had clients (I'm a former mortgage broker) who had problems with these programs, including charging hundreds of dollars in their fees to the client's credit card!!! What kind of counseling program is that? They charge fees to credit cards they are going to try to negotiate write offs and lower interest rates?

Repairing your credit takes time and dedication. My book "Getting To Closing" (www.CherylLPeck.com) gives discusses credit, as well as the entire application and closing process. Being aware of the process is the best defense against a loan program that is bad for you. The book also includes information on how to save money at closing and the life of the loan, what not to put in the sales contract, and how to read the GFE, TIL, and settlement statement.

I would appreciate comments from anyone who has read the book.

I graduated from college with a whopping $25,000. in credit card debt. I went with CCC to pay off my debt and in five years was debt free. I haven't had a car payment since! I learned to not spend what I don't have and wow that is one liberating path to take!

Joe. No doubt things happen. I recently got 30 day late posted on a credit card that I know I paid on time. They claimed they never got the payment. I got the bill from my PO Box, sat in my car, made out a check and mailed it right there. They called me about a delinquent payment which was the first I knew about it. The minimum payment was $5 and they charged me a $29 late fee.

They increased the interested rate from 7.5% to 24%. I believe it was a deliberate not posting. Sadly, I can't prove it.

I'll never use the card again. But, there's a 30 day late on my credit report. I believe that they scammed me but I could never prove it.

Diane. Indeed. Fact is, folks can't win.

Cheryl. I believe that CCC is a reliable resource. I have had buyers get approved for a mortgage loan if they made timely payments to CCC for at least 2 years, just as with a chapter 13 plan.

You hit the nail right on the head with the line that a good lender will tell you what someone needs to do to get back on the road to good credit.

Those credit repair companies, in my experience with clients who have used them, are nothing more than a waste of money.

Lenn, only they can make it happen.

They can do it, credit counceling is good, never understood why it wasn't madatory in high school to teach basic business law or sense.

Craig. Agreed. Some of my most rewarding sales have come when a determined and cooperative buyer follows the advice of a loan officer and does what they have to do to cure credit problems.

We worked with one VA buyer for a solid year and I finally sold them a lovely home in MD.

Sadly, some are just beyond repair for many years and bankruptcy is their only hope.

What amazes me is that so many consumers just do not understand that a clean credit record is essential to buy a home.

I often hear, "my credit is fine, I just financed a new car". HA! I tell them that anyone can get a car financed. Real estate is different.

Hi Lenn -- Your six bullet points are very critical and should be drilled into every consumers head, over and over so we can create a collective financial responsibility and knowledge base of savvy consumers.

Great information well said. Btw I love your topic it is catchy and intriguing.

Great information, as always. People need to take responsibility for their actions. The days of liberal credit are over - for now. Gone are the days when anyone with a job could get a mortgage. As for our kids, they need to know that their credit score is part of their resume. Bad credit = no house, and maybe no job.

Lenn- Excellent advise and that's why buyers should sit down with a mortgage professional to find out at the get go what they can afford, if they can buy, and what steps to take if repair is needed.

Lenn, the only way to be "credit worthy" is to suck up to the games being played by the banks (largely pointed at credit worthy borrowers, due to their ability to provide PROFITS with outrageous increases) and just pay the cards off...never to repeat. BK is tempting, but for some, an option behind sucking it up. Ugggh. If you want to buy a house, don't get behind, no matter how tempting.

Lenn, It seems that many folks do get to the point that they want to own their own home but they will not, as you stated, accept or admit to the fact THEY created their credit score.

Admiting it is the first step to fixing it.

Seems that some folks just think they can start again with no consequences for their past. What they forget is that they need to earn the trust and respct of all lenders all over again, and that takes times and discipline. I highly recommend everyone monitor their credit reports.

Hello Lenn,

Terrific title and post! Thank you for sharing the important message & tips. Have a great Sunday!

Rita

Roughly half of the people I talk to are not qualified. The ones that are really interested take my advice and we work on their credit. I have one looking to buy right now whose credit score was about 70 points lower than it is now. I hope it is successful in the end so I can post about it. !!!

Lets start teaching this stuff in school or college or daycare or jail.

Lenn,

Credit repair outfits can help, but you have to select one very carefully so you'll get what you pay for. Strong mortgage consultants can do the same thing. "Stay out of the mall" advice is solid.

These are important things for people to know as they consider purchasing a home.

I have learned to be very detailed with buyers over the years. Don't change anything financially was never clear enough and resulted in things like the purchase of cars or changing jobs or getting new credit cards in the middle of the process.

OCT

Leen, great advice! Love reading your posts.

Lenn, please stop recommending Consumer Credit Counseling as a good option for people in financial hardship.

There is nothing further from the truth. I wrote a blog on this very topic a few months back,

The Truth About Consumer Credit Counseling

The success rate for consumer credit counseling is 20%, they tell you that it will take 5 years then offer a bait and switch at the end of 5 years. Actual time to graduate from CCCS is 7 - 9 years.

Truth is that these organizations are owned by banks and nothing more than glorified collection companies. The creditors pay them 15% of anything that they "collect". Consumer Credit Counseling puts you in more debt, not less and you'll be out of the Real Estate Market for a longer period of time.

In terms of a quality credit repair professional I recommend Michael Bridenstine Trinity Enterprises, LLC. - Michael Bridenstine - 888-461- 8555 Ext: 303 mbridenstine@trinityenterprisesllc.com

Lynn -

So what is a mall anyway? Besides the one in Washington, I mean.

I rarely go inside one....and mostly to take in a movie at the local cheap seats.

Great advice.

It's often one of those: If I'd only known then what I know now.

Chris. Indeed. Think of how it would affect the bottom line of the credit card companies or banks who wouldn't be able to charge 24% for a late payment or $40 for an overdraft.

Roch. Thanks. I try to get their attention.

Millie. Right you are. That credit report has become far to insidious in it's use.

Dick and Dixie. Indeed. I speak with a lot of potential consumers and when I see a 70% back ratio, . . . . . well, you know the rest.

Laurie. "Don't get behind" is the secret. Just pay the dang thing when it comes in and "stay out of the mall".

Cameron. Absolutely. When I speak with folks who have what they call "fair" credit, they are loathe to admit that they simply do not pay their payments on time because they just love to wait until the last minute.

Corinne. Me too. I ask folks if they have obtained a copy of their credit report and most have not. However, they know that they have made payment late. They just don't want to admit that it might be the cause of their not being able to get a mortgage loan.

Rita. My pleasure. Thanks for dropping by.

Steve. Interesting. That is about the same percentage I see when speaking with potential buyers. We do work with some folks if the low credit score is due to simple fixes like percentage of available credit used, etc. However, when they have serious delinquencies, charge offs, judgments, etc. that's more time consuming than I have the time to work with.

David. Here, here. Yes, teach it in school or at home. I'll leave the inmates to you.

Esko. CCC is the only credit repair I refer folks to.

Christine. I have lost two contracts over the years when the buyer, despite my warning, purchased a new vehicle. Geez.

Megan. Love having you read them.

Kate. I disagree. Over the years of following credit repair companies, the Consumer Credit Counseling entity is the only non-profit company recognized by many.

I have had home buyers obtain a mortgage loan while still making payroll deducted payments to CCC.

Is their success percentage 20%. I would suspect that is about right, but I believe that's a significant success percentage when considering what they do. Besides, it isn't CCC that fails. It's the consumer who fails, which reflects a pattern of poor credit habits.

The CCC works almost like a chapter 13 bankruptcy except without the perceived or real stigma attached to the word bankruptcy.

I'm speaking from actual experience. I have sold homes to folks while still in chapter 13 and to folks who were still in CCC.

On the other hand, I have also spoken to many would be home buyers who got involved with private companies only to pay them big money up front and either the creditors didn't agree to cooperate or the company did not make payments as contracted and just kept the debtors' money.

Jim H. How true, how true.

THANKS TO MY ACTIVERAIN FRIENDS WHO REBLOGGED THIS ARTICLE.

Lenn, This is right on! I missed it when it was posted.

This blog post needs to be read by every homeowner that wants to buy a home but has not thought about the consequences of their credit habits!

I'm reblogging for my area too.

Thank you for allowing it to be re-blogged.

Judi. Thanks for reblogging.

This info is good for home owners, but the folks I speak with that really need the info are renters.

Hi Lenn, Great info. We hear stories of people that have paid unscrupulous credit repair companies thousands of dollars, only to help them get further in debt. Great post!

Sandy. Indeed. I've spoken with many who just got deeper into debt through a "credit repair" scam.

Good and timely information. It seems that more and more of our clients are looking for "credit repair" for recent problems with their credit. I agree that with time and discipline they will be able to get out of debt. Thanks for the post!

Lenn,

That was absolutely great advice and very well-written.

Far too many consumers keep spending whenm they are in financial difficulty. Spending will not help, nor will many credit repair companies. Your advice to stay out of the mall, will work.

Brian

Great advice Lenn on how people can help themselves. I'm not a big fan of the CCC's as I've heard a few examples of them making situations worse by the lowered payments.

Lenn,

As always, thanks so much for the useful post.

I'm re-blogging it for my clients on my outside blog.

Susan. I believe that we're seeing more credit problems because of the proliferation of "programs" that are bringing out first time buyers who would other wise have continued to rent.

Brian. HA! That is fundamental.

Lyn. I've had several buyers go with them with positive results. However, it has to be the real CCC. There are many bogus companies with similar names.

Ralph. Thanks very much. I appreciate that.

Lenn, in over 18 months you are the first person who has ever offered up a benefit of CCC companies over other programs.. I have spent the last year and a half educating myself on the topic. While not an expert I offer an extremely educated perspective. I have asked CEO's, Marketers, Sales Agents, industry advocates - not one of them has ever given an answer on how CCC benefits consumers over other debt relief programs.

Here is my issues with this post:

1. Your statement that CCC is the ONLY way to go. It's only one way to go.

2. This comment back to me raises the hair on the back of my neck. - I mean no disprespect but this statement is 100% inaccurate information. "Is their success percentage 20%. I would suspect that is about right, but I believe that's a significant success percentage when considering what they do. Besides, it isn't CCC that fails. It's the consumer who fails, which reflects a pattern of poor credit habits."

By making this statment you put forth a stigma that it's the clients who fail when it fact there is a structural problem with the credit counseling program from the onset. A 20% success rate strongly supports this contention.

In most cases, CCC only lowers interest rates but it does not lower the monthly payment that the consumer is required to make. From the onset the payment is too high. When a consumer goes to any debt relief program they are looking for cash flow relief, not just debt relief. Creditor practices are the primary reason for client failure. Most clients who drop out of the program state that the failure of creditors to work with them by lowering interest rates and payments are the reason for the drop out. Most who drop out are forced into Bankruptcy.

According to studies by multiple consumer groups and paticularally the consumerfed.org the key problems with CCC are deceptive and misleading practices, excessive costs and abuse of non-profit status.

I'm not saying that CCC doesn't have it's place. It's just not the only path, 80% of the time it's the wrong path.

Every time this blog post has been reblogged with it's current language a consumer has the potenital to be hurt. Lenn you are a powerful voice here in AR. Sometimes I agree with you, sometimes I don't. I am one little voice swimming upstream against an industry with a powerful media and public relations budget.

It is however an educated voice, one that talks to 10 to 15 clients a day who are in financial hardship. Just because CCC has worked for a few clients does not make it the only way to go!

Kate. I can only speak from my own experience. IMO, a petition for protection under the bankruptcy court is the best way for folks to go when they are in deep trouble. Either liquidation as far as the court will let them go under the new code, or chapter 13 for repayment of a percentage of their debt.

My preference for CCC is also based on the success I've had in getting our buyers mortgage financing immediately following the completion of their program or after they have been in the program for 2 or more years.

OTOH, I have had many, many conversations with consumers who tried other programs with no success.

I can only go with my own experience. Also, CCC is recommended by the Office of the Attorney General in Maryland. See:

"If it looks like your financial difficulties will last a long time, consider seeking some help from one of the following:

The Maryland branch of Consumer Credit Counseling Services, a nationwide, nonprofit agency, will try to help you iron out your debt problems. You can reach CCCS by calling (410) 747-6803."

More. . . . .

OCT

Lenn: I just love it ~ stay out of the mall ~ stay away from the credit cards. Great Post! So many folks do not understand that doing a short sale affects their credit ~ and some agents don't understand it either.

Lenn I understand your point of view and perspective, but I disagree. The numbers don't support it.

only 35% of chapter 13 Bk's are actually completed. The public record stigma and permanance of a BK make it a poor option for most.

20% of CCCs programs are actually completed.

70% of clients who enroll with reputable debt settlment companies complete the programs

As for the Attorney General - 2 years ago I might have agreed with you. Today my gut tells me that the Attorney General is an elected position and as such is suspect when it comes to making recommendations regarding anything having to do with the banking industry.

The banking lobbies are too strong and the tenacles too wide reaching.

We can't have it both ways. We believe that the government is clueless when it comes to legislation on our business but somehow it does the right things when it comes to making recommendations for consumers. History tells a different story.

Banks have a vested interest in muddying the waters when it comes to credit repair and debt relief. There is a huge amount of misinformation propogated by the financial sector and it's wrapped in warm and fuzzy not for profit and recommendations by the "government".

Are there bad companies in this industry? Absolutely? Are there bad people in this industry? Of course.

There were bad people and companies in both the mortgage sector and real estate sector. That doesn't mean that mortgages were bad.

Comsumers need choice and they need access to reliable, accurate information so that theycan make the right choices. INHO, the banking lobbiests are making this impossible by spreading misinformation and funding legislative campaigns to take away consumer choices.

Kate. You wrote: 70% of clients who enroll with reputable debt settlment companies complete the programs

Reputable deb settlement companies are not easily identified by most consumers. What is "reputable". Who are they??? Where are they and what do thay charge????

Also, what is the source of that statistic?????

I don't have all the answers. I can only go with my experience. We've successfully gotten home buyers approved for mortgage loans following discharge in chapter 7 bankruptcy and/or during the term of a chapter 13.

We look for 2 years following chapter 7 discharge and, if they haven't abused new credit, they can get an FHA or VA loan. That's not a study, or a statistic. That's our actual experience with many home buyers over the years, even in the past 2 years as loans have become harder and harder to obtain.

I'm following procedures that work for me and agents in my network. When I send a prospective home buyer to a loan officer for preliminary credit review, their past credit history is known and if there was a bankruptcy or credit repair history, we know how to handle it.

Sandy. When I advise folks to "stay out of the mall", they are engaged in searching for a home and obtaining a mortgage loan. The last thing we need is for a list of "inquiries" to appear, or to see that their percentage of available credit has gone from 15% to 45%. Eeeeeekkkkkk!!!!

Just read some excellent books by Dave Ramsey on budgeting and managing your money. Lots and lots of ideas that make good sense AND require a lot of self control in an "I want it now" society.

Penny. You bet. Dave Ramsey has become very rich by trying to let folks know that, if you don't have the money in the bank to pay for it, don't charge it.

Sadly, I suspect that most of his readership and listeners and watchers are not the folks with serious bad debt problems. He quite often is "preaching to the choir".

It is so sad that basic budgeting and common sense became so unpopular these past years. Like you, I remember when all of my buyers had 20% down and they paid their own closing costs. As a matter of fact, one of my first deals in 1991 was with B of A who had to offer to pay closing costs as part of a discrimination lawsuit settlement. My first-time buyers were thrilled! I hope we all learn from this recession.

Diane. I suspect that many have. Interesting though that my practice has not changed one bit. I still pre-qualify all of our buyers as I always have. They are all approved for their loan and they all keep their homes.

Some things don't change.

OCT

Lenn,

The stats are historical numbers based on eight years of data from our back end companies and our own retention. I do need to correct the percentage downward. Historically our graduation rate has hoverd around 70%. In todays economic climate the graduation rate has decreased to about 50%. Drop outs are usually due to loss of job, and reduced income.

To find reputable companies the consumer has two industry associations that they can refer to : The Association of Settlement Companies (TASC) and United States Organizations of Bankruptcy Alternatives (USOBA)

Lenn, I am in no way arguing with your formula and I do understand that your perspective is focused on selling homes. It makes sense that you would suggest CCC.

When I entered this conversation it was to challenge the concept that CCC is always best for the consumer. Based on the first hand knowlege that I have of talking to 10 -15 clients a day, if someone is buying a home after two years of entering a CCC program it's highly likely that they didn't belong in CCC to begin with.

In fact, it''s probable that Dave Ramseys program or other debt roll down, snowball effect programs would have been just as effective, less costly and more beneficial to the client. I often point people in this direction.

It saddens me to read the judgmental tone of many of the comments on this post. 8 out of 10 of the people I talk to are in the situation because of job loss, or extreme medical conditions that resulted in reduced income and increased expenses.

They find no help from creditors when they call to ask for relief. Often they find interest rates increase after contacting creditors because they have now become "high risk". Go Figure. They are often left dangling from a rope until the rope breaks. Debt settlement offers an excellent alternative to a Chapter 13.

If someone is in a true hardship, debt settlement will lower the DTI and get people out of debt and back on strong financial footing and into the housing market faster than anything else.

I don't belive in one size fits all formulas. Each client must be looked at as an individual with respect and compassion for their situation. The goal is to get people back in the game and into a position where debt no longer controls them.

Great article! Thank You!

Kate. Thanks for your input. It adds to the conversation and is, I'm sure, helpful to many readers herein.

Robert. Thanks.

OCT

Lenn, there are some people who need to hear this about eighty times a day. They just don't get the importance of keeping integrity in their finances.

OCT

Pat. Indeed. I spent five minutes yesterday explaining to a buyer that they have some work to do since they were discharged from bankruptcy 2 months ago. They thought they could get a mortgage loan right away.

Sad.

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