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Learn How to Improve a Borrower's Credit Score

A credit score affects your buyer's maximum loan to value and interest rate. Here are some ways to boost your clients' credit scores.

 

Mortgage Tip

Links You Want to Bookmark

I have several industry links you may want to bookmark for future reference:

A Word on Credit Repair Services

If your buyer has credit problems, you may be tempted to pay several hundred dollars to a company that claims to clear up your credit and remove all negative items, and so on. Well, let me tell you a few things about fixing credit.

There is no "magic wand" that erases bad credit legally. Valid negative items can not legally be removed if the credit reporting agency can validate the negative item.

There is a procedure that you can follow to get incorrect items removed. If you want to dispute an item or items on your report, you can send a letter to the agency requesting proof that this is a valid item. Credit reporting agencies have 30 days to respond to your dispute.

If the agency can not verify the negative information, it must be removed.

Legitimate credit repair services can often get negative items removed from your credit, and yes, you can do this yourself, if you know how to write the letters and where to send them. To help you with this, I have an excellent guide that will give you the tools to repair your credit on your own. Call me or email me and will get it to you.

 Credit scoring models are complex and often vary among creditors and for different types of credit. If one factor changes, your score may change, but improvement generally depends on how that factor relates to other factors considered by the model. The purpose of a credit score is to give a lender an overall probability of going 90 days late on any of your accounts within the next 24 months.

Only the creditor and sometimes your mortgage professional can explain what might improve your score under the particular model used to evaluate your credit application. Nevertheless, scoring models generally evaluate the following types of information in your credit report:
  • Have you paid your bills on time? Payment history typically is a significant factor. It is likely that your score will be affected negatively if you have paid bills late, had an account referred to collections, or declared bankruptcy.
  • What is your outstanding debt? Many scoring models evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, that may hurt your score.
  • How long is your credit history? Generally, scoring models consider the length of your credit track record. An insufficient credit history may have an effect on your score, but that can be offset by other factors, such as timely payments and low balances.
  • Have you applied for new credit recently? Many scoring models consider whether you have applied for credit recently by looking at inquiries on your credit report when you apply for credit. If you have applied for too many new accounts recently, that may negatively affect your score. However, not all inquiries are counted. Inquiries by creditors who are monitoring your account or looking at credit reports to make prescreened credit offers are not counted. If you are looking to buy a home, stay away from applying for installment credit, such as in furniture stores.
     
  • How many and what types of credit accounts do you have? Although it is generally good to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many models consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies may negatively affect your credit score.
  • Here's a trick to boost your score. If you have a family member who has a credit card with a good payment history and a low balance related to available credit, ask to be added as an authorized user. All this means is that the person's credit history for that card will be added to yours. In many cases, this can give you a boost of as much as 80 points on your credit report, and in no way harms the credit of the person whose card you became authorized on.

Scoring models may be based on more than just information in your credit report. For example, the model may consider information from your credit application as well: your job or occupation, length of employment, or whether you own a home.

To improve your credit score under most models, concentrate on paying your bills on time, paying down outstanding balances, and not taking on new debt. It's likely to take some time to improve your score significantly.

  

About My Services

I would like to help you with the task of providing financing to your clients. To do this, I am able to do the following for you:

  • Be available when you have an Open House to help greet buyers
  • Help explain the various financing options and mortgage programs your buyers have access to
  • Pre-qualify any buyer who has not yet talked with a mortgage company
  • Determine the largest mortgage for which your buyers qualify
  • Resolve any issues on your clients' credit report that can affect their mortgage.
  • Obtain a loan commitment from our lenders
  • Provide your buyer with a Good Faith Estimate of closing costs
  • Determine any seller assist that a prospective buyer may need and qualify for
  • Co-ordinate all aspects of settlement including title search, appraisal, and other services

At Your Company Name, we offer mortgages for most buyers, including ones who are self-employed or who have damaged credit. We have lenders who offer 100% financing meaning no down payment for qualified buyers.

We also offer mortgages with start rates as low as 1%, making it easier to get a buyer into a home.

If you have any questions about how I can help you get financing for your clients' homes, please call me at Company Phone #.