What’s the truth behind credit repair and buying real estate?
Does credit repair really work to help real estate buyers? Should you use it? Should real estate professionals refer their clients to credit repair companies? What other services do these companies provide that may be of use?
America’s Big Credit Issues
America has a big credit problem. Ongoing foreclosures have extended the impact of the financial crises on individuals’ credit. Millions are still suffering from the effects, which can be seen on their credit reports.
In addition to all those that missed payments in the crises, and saw their credit scores drop, incorrect reporting of payment histories has become extremely common. Even being a few points off of lender benchmarks can mean the denial of mortgage loan applications, or at least having to put a lot more money down.
DIY Credit Repair
Individuals can do a lot to fix, and improve their own credit. Some of it is a matter of rebuilding credit, or building credit from scratch. In other cases, time is the best healer. Some collection accounts may be better off negotiated out with creditors. You can do this yourself, often for pennies on the dollar. However, there are some items that will absolutely have to be challenged. Individuals can do this themselves, too. Everyone is entitled to a free copy of their credit report once a year, and they should take advantage of that. Then, individual items which show incorrect payment histories can be challenged and disputed with both the creditors directly, and the credit bureaus. Don’t expect this to be easy, but it is possible. It can take a lot of work, and a lot of hours, just as with taking the DIY approach to anything, but success can be found.
Credit Repair Services
There are many credit restoration services out there. Choose carefully. Some people report positive results from engaging these companies to work on their behalf. Others claim it is a scam, and that they have been tied up for years, and have forked out hundreds of dollars without seeing any major improvements. No doubt there are many credit repair scams out there, just as there are perpetrators of mortgage and real estate fraud, and other types of cons. Do your homework before going into business with one of these firms, but don’t immediately dismiss all of them.
Be realistic. These companies might have more power, and efficient systems for getting things done. There can be a big difference in trying to clean up incorrect information when you have documentation to support your side, and when you have simply not been able to make your payments. In other cases, the best thing you can do to boost your credit is to pay you’re your credit card balances. Just make sure you talk to a mortgage professional who can give you solid industry insight before making any moves. A mortgage loan officer may even be able to help challenge items for a quick re-score to get you a good home loan. However, if you don’t close quickly, and negative items comes back on, you’re back to square one.
Business Credit
One area in which some of these services may be of help to real estate business owners is building their business credit. Separating personal from business assets and credit is only smart. If you can get help to build up some credit lines for your real estate business, it could be incredibly beneficial. Again, just do your homework, and make sure you pick a reliable service.
Affiliate Opportunities
Many credit restoration companies offer affiliate opportunities. That means they’ll pay you for referring them business. This can be tricky. Adding extra sources of passive income is great, but do you want to blur the lines, and get blamed if credit repair doesn’t work out for that customer? It may be better to simply refer leads and then fill your pipeline with prospects that are working to boost their credit. A good company will also refer other business back to you. This can be especially smart for those working with rent to own and lease option properties. If these renter-buyers are not on a solid plan to boost their credit, they normally never qualify to buy, which can create all sorts of dilemmas.
Identity Protection
Identity theft has become one of the biggest threats that we all face, and it is a lot more common than most realize. Identity theft protection can help homebuyers ensure that their credit stays in tact during the process. Imagine getting to a closing and having your credit pulled again, only to find out you no longer qualify for a loan because someone ran up credit card bills in your name!
Summary
Keeping a close eye on your credit, and helping clients to protect theirs is just common sense. Helping others to boost their credit can be a win-win for everyone. However, it still remains a tough choice between taking the DIY approach, getting an attorney to help, or looking to a credit repair service. Remember to do your due diligence.
