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Working Through Credit "Surprises"

By
Mortgage and Lending with First Choice Mortgage Group

money bag and credit reportA major part of the job of a mortgage professional, in my opinion, is helping customers get their credit cleaned up in anticipation of becoming qualified buyers. In today's market, lenders have become increasingly tighter, scrutinizing any potential credit issues in an effort to ward off the possibility of foreclosure.

However accurate or inaccurate it might be, credit scores are used as a predictor for the possibility of a consumer going 30/60/90 days late on their potential home purchase, all the way up to "predicting" the possibility of foreclosure. Therefore, it is of utmost importance to not only know what is in your report, but as well, how to rectify the negative results you might find.

boy carrying booksIn beginning the process of purchasing or refinancing your home, it is important to do your "homework" first. When a consumer comes to me looking to become pre-approved for a home loan, I believe in not only taking the basic application information, but getting an income verification (recent paycheck stub), and completing an interview surrounding the consumer's financing history. This allows me knowledge of how well you are self-aware regarding your personal finances, and how open you are in regards to allowing help in getting issues resolved. At that point, I will initiate a basic tri-merge credit pull, and review the report line-by line with you in an effort to ensure accuracy of the report. From there, you and I will work together to create a "plan of action", and I will give guidance in an appropriate manner in order to help work out any credit glitches that may stand in the way of getting financed. We will develop a reasonable time-line in order to get things worked out, and stay in touch periodically, based on the severity of the credit issues.  

There are a few ways of dealing with credit repair. There are credit repair specialists who will review your credit, write the letters, and send to the various bureaus and creditors. These specialists can cost anywhere from $99 per item repaired to a $500 flat rate for all three bureau clean-ups, and higher depending on what they need to do. There are reputable, as well as disreputable credit clean-up services, as in all industries, and should you take this route, it would be in your best interests to contact a mortgage professional who has dealt with credit repair issues to ensure the reliability of the credit repair specialist used. These services can be valuable, as it can be a daunting task to undertake your credit clean-up in your own hands; it can be a timely endeavor, and less effective should you not know exactly what to write or what steps to take.

Should you wish to tackle the credit clean-up yourself, I will walk you through the steps of filing dispute letters, to whom, and how to best document your efforts. As stated before, this can be a timely endeavor, and if there are extensive issues, it would be advised to bring to the hands of a credit repair specialist.

After our clean-up efforts are completed, and documentation has been received from the bureaus verifying resolution, we will sit down for a post clean-up interview, review areas of the credit report that are still present, review "personal" work that has been completed (ie. paying credit cards below 30% of maximum), and repull the tri-merge credit report. This generally takes place 45 days following the initiating of the credit clean-up, as creditors have 30 days to respond to disputes, and bureaus need time to rescore the credit. This time-line is, of course, dependant on the type of clean-up being performed.

Once your credit is under control, we will move forward with getting you pre-approved! 

                                                           new home purchase

Keith Perry
Coldwell Banker - Hiram, GA
REALTOR - West Metro Atlanta
Great post Bo!! Having someone to help you get the score up these days to qualify is awesome. It was great meeting with you yesterday. You should have came to the board luncheon, we played bingo for a spell to raise money for RPAC. It was fun!!
Apr 09, 2008 01:05 PM
Liz Moras Migic
Chilliwack, BC
Chilliwack, British Columbia - Realtor
I can't imagine any professional mortgage provider I know *except you of course....take the initiative to 'help' a client clean up their credit!  Wow.....how proactive, and helpful not to mention helping to diffuse your customers  'stress bomb'....cool
Apr 09, 2008 01:34 PM
Artisan Custom Estates
Artisan Custom Estates - Alpharetta, GA
That's a great service you are providing, Bo.  So few truly understand the specifics of how they can improve their credit, and the implications a credit improvement can have on their purchasing capabilities and quality of life. 
Apr 09, 2008 02:57 PM
Bo Hunt
First Choice Mortgage Group - Douglasville, GA
Metro-Atlanta Mortgage Professional

Hey Keith... Thanks! Working with credit issues are that much more paramount these days. I'm sure others will begin offering these services as credit requirements get tougher, but I've always been a "people person", wanting to help them achieve the dreams they have. What turns a dream into a goal is nothing more than a plan of action put into play.

I hated missing the luncheon yesterday, but I was concerned that my "plate was too full", and didn't want to take the time out, especially after the call I received at the end of lunch Tuesday (see email I sent you last night). Looking forward to seeing you guys soon! Tuesday lunch was fun.

Apr 10, 2008 05:21 AM
Bo Hunt
First Choice Mortgage Group - Douglasville, GA
Metro-Atlanta Mortgage Professional

Hi Liz... I finally got to respond to my comments. Last night was a little frustrating, but I took it as a sign to go to bed and get a good night's rest!

Of course I'm going to provide this type of service. It's what many poor souls out there need, and I'm "Mensch"! (LOL)   smiley face

Apr 10, 2008 05:31 AM
Bo Hunt
First Choice Mortgage Group - Douglasville, GA
Metro-Atlanta Mortgage Professional

Hey, Chris... Thanks for commenting! Credit is key! While the scores are important, equally important are the collections, judgements, liens and foreclosures that are sometimes there when they shouldn't be! It's incredible to me, that some creditors are quick to post a blemish, but once cleared up, don't go back to  rectify the situation! What's even more disrespectful (in my opinion), is that consumers generally have some cost to pay to get it cleaned up, without the original creditors being held responsible for not rectifying the situation themselves. Crazy, huh?

Thanks again!

Apr 10, 2008 05:38 AM
* Rate A Home
Rate A Home - Saugatuck, MI
Bo, it is amazing how many surprises show up on credit reports. Some where along the way the government is going to have to provide a safety net of what a company can post to some ones credit and how many times an existing lender can check on ones credit once they have lent to that customer, as long as they are making timely payments.
Apr 11, 2008 05:51 AM
Russ Higgins
Credit Justice Services - Memphis, TN
Credit Justice Services

Excellent article, Bo.  So many of the mortgage companies I consult with have no idea about the credit repair process.  It's great to see that you are aware of how to go about getting scores where they need to be - especially considering that 8 out of 10 reports you see contain inaccurate information.  Those inaccuracies almost always cast the consumer in a more negative light than they deserve...

Good luck!

Apr 12, 2008 01:07 AM
Bo Hunt
First Choice Mortgage Group - Douglasville, GA
Metro-Atlanta Mortgage Professional
Hi Russ, Thanks! Those stats. are sad considering that credit is such an integral part of the mortgage business. It seems to make sense that mortgage guys/gals would know how to help those with credit issues! I do know you are right, however, as many of the seminars I go to have such elementary questions asked, and there are so many misconceptions floating around out there. Thanks again for your kind comments!
Apr 12, 2008 01:46 AM
Bo Hunt
First Choice Mortgage Group - Douglasville, GA
Metro-Atlanta Mortgage Professional
Hi Duane! You're right! There are so many issues that have been resolved in some consumers' past, yet not been corrected on their report. I wish there could be some accountability on the creditor's end... responsibility is difficult to hold, when no consequences are tied to the action... Hold the creditors/ COLLECTION AGENCIES accountable with consequences; things might change. Until then, i advise consumers to maintain checks on their credit BEFORE beginning the home buying endeavor. 
Apr 12, 2008 01:58 AM
Jacob Webster
Sagamore Home Mortgage, LLC. - Zionsville, IN
Indiananulls Senior Mortgage Consultant
Great article.  Helping clients clean up credit scares most LO's away simply because its very time consuming.  They do not realize the benefit of this down the road.  By doing this you will see an increase of income beyond your belief.  It will help you close more loans, and build a stronger referral base with that client and many more clients.  THanks for the post!
Apr 12, 2008 02:01 AM
Marchel Peterson
Results Realty - Spring, TX
Spring TX Real Estate E-Pro
BO, You are the type of lender that I like to work with.  I have a local lender here who often works with my clients.  As a matter of fact I have started adding a blurb on to almost everything I send out saying "With today's ever changing mortgage environment it is more important than ever that you get preapproved.  Don't wait until you are ready to buy a home.  Get preapproved at least 6 months before you actually plan on buying a home. If a problem arises then you have time to take corrective action."  That wording was from my lender.  We came up with that because I work with so many internet buyers and I have had a run of buyers who aren't getting approved. 
Apr 13, 2008 03:13 PM
Bo Hunt
First Choice Mortgage Group - Douglasville, GA
Metro-Atlanta Mortgage Professional
Hi Jacob... Thanks! You are exactly right... It may be time consuming, and not immediate gratification, however, working with someone in an effort to get them in a place to be able to buy solidifies that relationship and helps tremendously with referral benefits! Not to mention, it just feels great to help those that struggle with their financing ability, many times based on lack of basic knowledge.
Apr 13, 2008 03:24 PM
Bo Hunt
First Choice Mortgage Group - Douglasville, GA
Metro-Atlanta Mortgage Professional

Hey, Marchel!... Thanks for your kind words! That is a great add-on! There are, indeed several people that simply can't qualify right away. I will complete a basic application/income verification/credit pull (with permission), and review the credit report line by line with my customers, checking for inaccuracies. I will contact my referring agent, and let them know, based on the information I have received, a general time frame for buying. This gives the Realtor opportunity to help them begin to search for a home they can comfortably afford, as well as qualify for(sending MLS listings, etc) a month or so out from the projected date. Once they are ready, my Realtor has already helped them narrow down the search, rechecked availability of the homes, and is ready to complete the "driving tour". It helps streamline the process to some degree, anyway!

Apr 13, 2008 03:34 PM
Scott Benson
Geneva Real Estate and Finance - Santa Monica, CA

Great post.  I am always trying to encourage my clients to see me early in the process.  With time, we can fix issues that otherwise might become critical in the approval process.  Give me some time and with their help, we can fix many of the credit issues that arise.  If its the last minute, it oftne ends up costing more for them in terms of a higher rate or a missed purchase.

Apr 14, 2008 03:07 AM
Bo Hunt
First Choice Mortgage Group - Douglasville, GA
Metro-Atlanta Mortgage Professional
Hi Scott... As you say, time is imperative for those that have credit issues. Unfortunately, too many consumers these days don't even realize they have the issues to begin with, creating an ugly surprise when they have decided to begin pursuing a home purchase. Thanks for your kind comments!
Apr 14, 2008 04:14 AM