The Truth: Will Credit Repair Help You Get a Mortgage Loan?
Posted: Wednesday, January 04, 2012
by John Hopkins
http://bankerpros.com
First off – unlike 97% of the articles on the Internet about credit repair, this one is not written by someone selling credit repair services. In fact, I have no affiliation with any credit repair company, or other company that sells a service related to credit repair, or other quick fix. In complete disclosure, I am a federally licensed Mortgage Banker, a position I have held since 1999. I am someone whose job is to evaluate loan applications and counsel borrowers who wish to purchase a home. I specialize in lending to the credit challenged, the first time home buyer or those attempting to recover from a financial hardship. I have assisted thousands of applicants throughout the years so I feel uniquely qualified to answer the question, “Does credit repair work?"
I could elaborate for several pages but for sake of time, I will break down the major reasons I feel credit repair is not a valid course of action for today's mortgage seekers, and how the new banking laws make credit repair a deterrent to obtaining home financing.
- Most Credit Repair Organization (CRO) promote the business of disputing items on client’s credit reports without regards to the actual legitimacy of such items. This is called the bombardment technique. This practice was once effective but no longer. The credit bureaus, Experian, Trans Union, and Equifax have specialized computer software programs to optically identify these frivolous letters and flag your credit file as a ‘systemic disputer.’
- Credit Repair Organizations typically employ inexperienced employees to handle their dispute process. Not only do these indivisuals have little knowledge of banking law, but their actions could prevent a qualified person from obtaining a mortgage loan. This is especially true of those who perform these services part-time or as a side business.
- Credit Repair now invalidates most mortgage applicants. The new Federal banking law prevent buyers with any ‘Account in Dispute’ statuses from being approved until: the account is removed, paid or settled, the account has a zero balance, the dispute is resolved, or the dispute is removed and credit is rescored. Ths new law makes credit disputes and credit repair destructive to mortgage applicants.
- Most consumers want not just a higher score-- but the benefits of a high score – such as a loan approval or better credit offers. Credit Repair invalidates the benefit of a higher score as disputed accounts remove eligibility.
- Credit Repair is not bankruptcy protection. Challenging creditors on collection accounts does not remove, forgive or indemnify a person from a debt which is legitimately owed. The creditors usually just resell the debt and the consumers score plumments again.
- Credit repair gives many consumers a false sense of hope and restitution to their problems.
- Credit repair teaches many consumers to ignore their future financial obligations, thinking credit repair is a future credit safety net.
- Credit repair is a multi-million dollar business that preys on the desperate and the uninformed with a promise of a fresh start, when in fact the consumers who enter into credit repair are subjected to additional predatory tactics by the CRO itself.
- Every State and Federal Internet site warns consumers against credit repair rip-offs and other similar life-improvement scams.
- Credit Repair (when employed to challenge legitimate owed debts) is a deceptive practice that charges consumers to ‘remove accurately’ reported items. CRO’s do not distinguish the difference in accurate and non-accurate in their bombardment of letter writing..
Most asute financial advisors would recommend honest counseling, remediation (settling and restitution) of past debts, as well as taking strong preventive measures to keep your credit report clean and free of future negative items. In the mortgage world - you don't have to have perfect credit, but it does have to be non-disputed. There are many legitimate alternatives to resurrecting a credit rating – but all must start with an honest self-evaluation of financial habits, personal finances, and life goals. Entering into credit repair as a cure-all without including a resolution of your past issues will only prolong a person’s financial recovery.
(Please note – this article was written from the perspective of using credit repair to obtain a mortgage loan, and the information contained herein relates to that objective only.)
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