You don’t have to watch mortgage clients walk away because their credit scores aren’t ideal for getting a home loan. Helping these clients raise their credit score not only helps you to close more sales and get more referrals, it can actually change your clients’ lives.
While you may not be able to charge for credit repair services, helping your clients to repair their credit and increase their credit scores ultimately helps those in the mortgage and real estate industry. Take the time to understand the and these five ways to raise your clients’ credit scores:
1. Correct credit report errors, duplications, and misreported information
Credit records go back almost a decade, which is a lot of time for errors to accumulate. In fact, a significant amount of all credit reports have errors on them. Many of these errors are simple corrections that can have a big impact on clients’ credit scores, such as:
- Accounts that aren’t theirs
- Closed lines of credit that show as open
- Incorrectly reported amounts
- False information
Have your client obtain a free credit report
Your clients can order their own credit report and they won’t receive a negative hit to their score. Credit monitoring services such as PrivacyGuard offer a $1 trial and provide instant access to credit reports from all three credit bureaus (Equifax, Experian, and Transunion). Clients can then choose to have their credit monitored while they work to increase their credit score or stop their trial.
Go through the credit reports with your client
While this can be tedious, it’s important to go through your clients’ credit reports with them. If you do this by hand, make sure to mark all errors and false information on the credit report. Credit repair software can save you and your clients valuable time by importing credit reports and automatically highlighting errors.
Contact credit reporting agencies and lenders to have them fix any errors
Once you have identified errors on your client’s credit reports, you or your client will have to contact the three main credit reporting agencies or the lenders directly. Having an efficient system and letter templates makes this process easy, and most errors are quickly fixed.
2. Negotiate with creditors about negative marks on credit reports
Once you and your clients have gone through their credit report and addressed any errors, it’s time to address any legitimate negative marks they have. Negative marks can include an unpaid bill, late payment, or defaulted account. Before you or your clients call to negotiate directly with a creditor, it’s important to know what to ask for:
- Removal or reduction of fees
- Removal of negative marks if account paid in full
- Removal or reduction of accrued interest
3. Advise clients to pay down all their credit cards to below 30%
Lenders want to see that your mortgage clients aren’t financially overextended and are responsibly using their credit. According to NerdWallet, lenders generally don’t like to see more than 30% debt on a credit line, even if your clients are paying it off each month. This means that if a credit card has a $1,000 limit, clients should keep their spending below $300 on that card. Discuss this with your clients and have them work to pay down any existing debt, starting with credit cards with over 30% of debt.
When you take the time to educate your clients on healthy financial habits, it will benefit both you and them. Clients who practice good budgeting and understand how to use credit responsibly will qualify for a higher home loan and are at less risk of defaulting on payments.
4. Remind clients to keep old accounts open and stop applying for new ones
Take the time to teach your clients that closing a paid account can affect their credit score and keeping their accounts open establishes stability and paying habits. If they do not plan on using the account, have them keep the account open and cut up their credit card.
It is also important that your clients understand that applying for new credit can negatively affect their credit score. If your clients are committed to repairing their credit and increasing their score, they should refrain from applying for any new credit. Too many credit inquiries within a short period will negatively mark their score.
5. Encourage clients to maintain up to three credit lines and one installment loan
Once you and your clients have worked to fix any credit report errors, negotiated with lenders, and paid down any debt, advise your clients to maintain two to three lines of credit and one installment loan.
Credit cards are one of the best ways to build credit. As long as clients keep their purchases to less than 30% of their limit and pay off the balance each month - this is a simple and effective method to increase credit scores. Make sure clients understand the importance of long-term maintenance of their credit cards - lenders want to see that clients are stable over time.
There are different types of lines of credit. Which your clients use will depend on their circumstances. Here are a few types:
A secured line of credit:
- Is backed by collateral
- Includes specific requirements
- Is less risky for lenders
- Is easier to qualify for and has a lower interest rate
An unsecured line of credit:
- Is not backed by collateral
- Is harder to qualify for
- Has higher interest rates
A personal line of credit:
- Can be either secured or unsecured
- Interest rates dependent on the risk to lender (secured lines have lower interest rates)
Common installment loans include:
- Auto loans
- Student loans
- Home loans
A credit-builder loan:
- Specifically for people with poor credit or who have little or no credit history
- Does not require good credit for approval
- Is from lenders who want to help people build credit
It may not be financially smart for clients to take out personal or installment loans just for the sake of credit building - don’t advise your clients to go buy a car just to build credit. If your clients are having a tough time obtaining any credit lines because of low credit scores, they may need to start with a secured credit card and credit-builder loan.
Increase Clients’ Credit Scores to Increase Your Income
For some clients, this can take time and patience as they learn new credit habits. For others, just fixing a few credit report errors may be all that is needed to raise their credit score. With opportunities for lines of credit everywhere nowadays, educating your clients about responsible credit practices is more important than ever.
With the best software and automated methods, helping your clients improve their credit score is simple, straightforward, and makes a big impact. As you start to retain more clients and close more home loans, you will notice the value of credit repair for you and your clients.
What techniques do you have for helping your clients with credit repair?
Daniel Rosen is the founder of and an expert in running a credit repair businesses. He is a mentor and thought leader for thousands of credit repair businesses across the United States. Daniel is the author of , creator of the online training course, and valuable articles such as and .
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