While the subprime mortgage debacle is largely responsible for the current downturn in the economy, the current malaise in the housing market isn’t entirely due to people not wanting or afraid to buy houses; It is largely due to low credit scores that prevent people from getting a mortgage or mortgage refinance deal.

To make matters worse, with the horrific rise in foreclosures across the country, the problem of mortgages and mortgage refinancing for mortgage brokers is only going to grow.

When a person’s credit score goes down, so do their mortgage choices and mortgage refinancing options. Also, tell your customers to beware of dodgy credit repair companies and other scams on today’s market that promise to “repair bad credit.”

Good credit is an absolute necessity for a loan originator to make most reasonable mortgage and mortgage refinancing deals, and since the problem is not going to go away any time soon, it is incumbent on the loan originator to help its clients with ideas for the credit repair process. to improve your credit scores.

This type of credit repair counseling is the way a mortgage broker can turn a potential customer into a “real deal” and close your mortgage or mortgage refinance deal. Also, if done correctly, most of the time, the process can be accomplished in a relatively short amount of time.

Step 1

Keep in mind that rebuilding someone’s credit score is an ongoing process and requires careful preparation to successfully rebuild your credit to an acceptable level for a well-structured mortgage or home refinance product.

Encourage your client to be conservative in any new monthly credit score building budget so they can make the payments and never fall behind on anything. Caution your client not to structure a schedule with monthly payments that they cannot comfortably afford, because falling behind on any payment will further lower their credit score and may make a new mortgage or home mortgage refinance impossible.

If there are extenuating circumstances such as divorce, insist that they review your credit program with your attorney before agreeing to anything.

Step 2

If your customer’s credit card companies have understated or understated their credit limits on their credit cards, this can hurt their credit score. For this reason, have your customer determine if their credit card companies are understating their credit limits on their cards. Credit limits are often reported as lower than they actually are, and often may not be reported at all.

While we’re on the subject of credit cards, make sure your client has a minimum of three credit cards or another type of revolving credit. Many people mistakenly believe that having credit cards actually hurts their credit score and because of this they cancel some or all of their cards. Your credit score can suffer further and your chances of not getting a new home mortgage refinance or a new mortgage are higher simply by paying off your existing credit cards.

Also, if they don’t have credit cards, ask them to get at least three. If they have trouble getting typical cards like Visa, Master Card, Amex, etc., tell them to try a local department store, Home Depot, or Lowes. Quite often, these types of stores are more lenient in granting revolving charge accounts.

Step 3

Make sure your customer reduces outstanding credit card balances to less than 30% of their credit limit on each individual card. Some people mistakenly think that the 30% figure is based on your overall credit card revolving balance, but this is false. A single card over the 30% balance can nullify the benefit of the effort of having the revolving credit cards in the first place.

If your customer has one card over the limit and several others under the limit, if they are strapped for cash and can’t afford the highest card, ask them to see that they can transfer some of the balance from the highest card to the lowest cards. low. Ask them to check first before doing this to see if this type of transfer creates a higher interest rate or any other adverse effect on your credit.

So, if a person has 3 credit cards with a total credit of $12,000, but two of them have a $2,000 limit and the other has a $8,000 limit, make sure they keep the cards with $2,000 limits. 2,000 under $600 each and the $8,000 card under $2,400.

Implementing this simple process will increase credit scores, along with the chance of getting your desired mortgage or mortgage refinancing program.

stage 4

When helping your client increase their credit scores, be sure to check their credit reports frequently to determine their status and any errors on their reports.

Errors are so common on credit reports that more than 75% of all credit reports have at least one or more errors. Just by being diligent and carefully making sure any incorrect reporting information is removed, your credit score will often go up incredibly. This is without a doubt one of the easiest and most effective things your client can do right away to dramatically improve their score along with the potential for them to get a new mortgage or refinance their existing mortgage.

step 5

If your customer’s credit has been damaged by the time it was sent to a collection agency, you probably don’t want to pay off the credit card debt right away. As unbelievable as it sounds, this situation can actually be more damaging than submitting credit card debt to a collection agency on your credit history.

When one of your customers has been referred to a credit collection agency, the effect on their credit is low after about two years and is all but gone after four years.

Make sure your client receives a written promise from the collection agency of a “letter of removal” before they do anything to satisfy their old credit card debt, because without a letter of removal, it may hurt their credit problem. more than help him. Emphasize to your client that they should not pay any of the bill until they receive the collection agency’s written cancellation letter agreement.

Most people trying to improve their credit to get a mortgage or home mortgage refinance think they have to pay everything off as quickly as possible, but this is a case of paying before you get the proper documents protecting your situation can cause serious damage. your credit People have actually paid off a debt in full or negotiated a settlement only to learn to their dismay that they now have no influence on the collection agency sending the removal letter.

step 6

Finally, if your customer is defaulting on a car or boat, ask them to get some sort of installment loan from someone like Best Buy or Sears for a necessary appliance or Staples or Office Depot for some business equipment. Credit bureaus look carefully at not only the fact that you have credit, but also the combination of types of credit you have. Having only credit cards is not as advantageous as having credit cards and some type of installment loan.

Make sure your client is keeping an eye on the rates on their new installment loan. Some of these fees may be “off the ceiling” and put stress on the monthly budget.

Also, unlike credit cards that you must hold in perpetuity, obviously, revolving credit reaches a point where the loan is satisfied and the monthly payment ceases. Tell your customer that this is not a “license to spend,” but if they want to increase their credit score, they should not pay cash for higher value items, but rather make a large down payment in cash for the item and get an installment loan to finance the remaining balance. Financing a smaller amount can actually lower the interest payments on the loan, which lowers the monthly payment; all of which makes your client more likely to improve their credit score and obtain a new mortgage or home mortgage refinance.