It's not hard to find advice on a full-range of credit issues today. Experts (or so called experts) are everywhere. So I find that most of my clients come to me with the understanding that credit scores are very important ... and growing more so each day.
But experience with Borrowers pertaining to credit management has made it abundantly clear to me, that way too many do not spend enough time or pay the proper attention to their finances. That simple steps needed for credit maintenance are often overlooked, forgotten, or dismissed.
I also find that in most cases I see, that poor credit scores are not the result of malicious intent towards spending itself. Rather it's a lack of understanding of how spending, payment, or non-payment of financial obligations reflect on a credit report (and when those become reflected there) that causes the issues.
This basic misunderstanding, paired with a somewhat cavalier attitude towards credit management, is what leads me to believe that courses addressing credit and credit management are sorely needed (and by that, I mean should be mandatory) in our high schools. And in a growing number of areas, they are.
These courses are most beneficial and timely when they are offered prior to a child heading-off to college or entering the adult world. Prior to a time when they can start doing damage to their credit standing. How to establish, then maintain a proper credit score should be the focus of these classes.
To lend credibility to my view, I'll illustrate examples of how "not knowing", paired with that cavalier attitude I mention, adversely effected two hopeful Borrowers ...
In one case when my Borrower came to me, he had several "bruises" on his credit, including a prior income tax lien. While my client had paid and satisfied the debt (done through garnishment of his wages via his paycheck) and there was no longer a balance owed, neither the IRS or the client had notified the Credit Bureaus, those being Experian, TransUnion, and Equifax, of that satisfaction being accomplished.
In the second example, a judgment had been court ordered against my client. A public filing, again resulting in a wage garnishment, had been inacted. And once again, the debt had been fulfilled in its entirety without any of the participating parties reporting it to the 3 Credit Bureaus.
In both cases, the debts still appeared as though they were still owed, according to the "known" status of the account. Since judgments and liens must be paid in full ... AND require an actual written "Release" be issued and recorded by the local court jurisdiction (typically the County Recorder or Clerk of the Circuit Court), a very integral part of the repayment process was missed.
In both instances, my Borrowers argued that it was someone elses responsibility to have seen that the "Release" was filed and recorded. And there may have been some truth to their arguments. But the bottomline is this ... it's ultimately the Borrower's responsibility to see that their account status is correctly updated. No one is more effected than the client if the Release is not recorded.
I will also point out that in both cases, the Borrower did not know that their Release had not been recorded. Neither client had followed-up on that important step or taken the time to check their credit or credit standing ... until they made mortgage application with me.
The wheels of credit and credit repair do not turn quickly. Valuable time is lost while searching for past documentation, older statements, or proofs of payment. Often, a Letter of Explanation must be written by the Borrower addressing the circumstances still showing on Credit Reports. Reviews and updates must then be made by the Credit Bureaus. All this eats-up precious and valuable time during contract time constraints and creates stressful situations.
The results for my two Borrowers? One eventually closed on the home he initially transacted for. The Sellers extended the Contract until he could get his credit issues resolved. They were lucky. The second? They did not fair as well. They did buy a home ... eventually, but not the one they had originally found and loved so much.
Remaining educated, paying attention, seeing to details, taking charge of your own finances, credit, and credit management are positive and pro-active actions that every adult should take. That is true, whether they are hoping to buy a home or not. The best management and pro-active action can be accomplished relatively quickly and simply by running your credit report at minimum, on an annual basis. Go to www.annualcreditreport.com for your free annual credit report. Or contact me, should you be hoping to buy a home or refinance in the future.
Credit and Credit Management: Reasons to Pay Attention. It's my opinion that if these two issues alone became "non-issues" ... the number of mortgage approvals would rise dramatically.
* Hoping to Buy a Home or Refinance soon or in the future? Work with a Mortgage Lender experienced in all phases of the financing process ... from early credit assistance, through the mortgage process itself, and beyond. Contact me today! I'll put my 35+ years of mortgage experience and expertise hard to work on your behalf.
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