The reality is that many buyers’ credit ratings are far from ideal and they often need help getting themselves into a credit position that enables them to purchase a home.
What credit repair is
First, credit repair can correct legitimate errors on a buyer’s credit report. There are lots of ways mistakes can be made, including incorrect data reported to the credit bureaus, such as payments that were made on time but reported as being late.
Data that shouldn’t be there also can often appear on a report. For example, credit information for two people (often who are related and have similar names) is accidentally blended.
This is especially true when the credit of a non-purchaser is pulling down the score of the person looking to buy. It needs to be quickly pointed out to the bureaus and removed.
What credit repair isn’t
Credit repair can’t magically make events like previous bankruptcies and foreclosures disappear from a credit report.
These “credit events” are still a matter of public record; if the borrower attests on the loan application, as many actually do, that these events never happened, be aware that the lender can quickly uncover the truth. This would be considered fraud, and it can cause the applicant more than a little trouble.
Less-serious credit issues
Items that have less of an impact on a credit report, such as collections, should be turned over to a credit repair agency.
These agencies can request documentary proof from the collection agency that the debt is legitimate. Under the Fair Credit Reporting Act, if the collection agency is unable to provide proof that there ever was a valid debt, the credit bureaus are obliged to remove it from the credit report.
But if, on the other hand, the debt is valid and documented, it’s unlikely it will be removed.
Finding a reputable credit repair agency is like finding any other type of reputable business. A referral can be an excellent way to locate a reliable credit agency. The credit repair industry is federally regulated, and individual agencies will have ratings through industry groups, the Better Business Bureau, and online reviewers.
Your mortgage partner
Ideally, you will want your mortgage partner to become involved in your efforts to help repair clients’ credit. This will be a lender (or two or three lenders) who work with you on lending issues and answer your financing questions, and who may help you present the financing aspect of home buying at new home buyer seminars and in client education literature.
For some lenders, the prospect of preparing your “diamond in the rough” clients and prospects may be daunting—it usually requires three to six months or more of work to have buyers be purchase ready. But many others are comfortable being as much of an advocate for your credit-challenged clients as you are.