So what’s the deal with credit repair and is it a real benefit to the consumer? The reputation of credit repair has always been one of question and concern. As a matter of fact, some people even wonder if it really even exists. Well, let’s dig into this subject and expose some problems with this industry.

For those of you who know me or have heard me speak, you know that I do not like the term “Credit Repair”. I despise how credit repair services market themselves and “sales pitch” their businesses. Most companies sell credit repair services as “Get Better Credit in 90 days” or “Repair Your Credit for as Little as $79 a Month” or “One flat fee for all people and all situations”. The issue with this type of marketing is that it lacks the true meaning of being an expert and working with clients on specific issues. I have seen thousands of credit reports and never reviewed two that were identical.

The first step in any process is to find out the reason for the issue. The second is the ability to see if the client understands how they got into their situation and what it will take to correct it. An expert has to help the client understand the situation, even if that means a “hard conversation” must take place.

Clients must have confidence! Without confidence, it is hard for people to solve the problem and recover—that is one issue with our overall economy.

The final process is to implement the solutions and change course or behaviors to support the correction. Here is the hard truth, not all people are good with money and will have good (great) credit. If people have unsuccessful money/credit habits, then the results will be unsuccessful. If they have successful habits, meaning being aware and conscious of there finances, chances are they will have great credit and money behaviors.

In today’s world and economy we meet with people who have massive life changes. They have experienced financial and career setbacks. I have met with people who were millionaires in 2007 and now are broke and paycheck to paycheck today. This is a client who has experienced an event in their life that they did not predict.

I also meet with people who have great incomes, but are challenged with the fundamentals of handling money and credit. They have indulged themselves into the “hyper consumerism” mentality that we Americans sensationalize. They are behaviorally challenged and need coaching to change habits and build positive money behaviors in their lives.

The two clients I just described are totally different….the wisdom is to know the difference. The process and solutions are very different as well. Our specialty is to help people maneuver through credit issues with individual coaching or services. Like a personal fitness trainer, we partner with our client and work together toward a goal. The guidelines are set up front and expectations are put in writing.

I know someone can have their car repaired; I am not sold on the idea that credit can be repaired. It is imperative to have a strategic plan and specific information to achieve a goal.

Never has there been a time where people have more questions about their credit and how it is affecting them as right now…we are here to assist!

Mortgages Tougher to Get for Credit-Challenged Consumers
By Christine DiGangi

Two things can make a big difference in your ability to get a home loan: credit scores and proof of income.

Actually, there are a lot of things that impact your eligibility for a mortgage — like income and debt — but it seems credit scores and proof of income have caused some aspiring homeowners more trouble than most. The latest Market Pulse report from CoreLogic says that borrowers with poor credit and limited documentation of their income and assets have found it much harder to get loans when compared with other mortgage originations following the housing bubble.

“Underwriting eligibility in the current market requires borrowers to possess good credit and the ability to document their loans fully,” the report said. The report looks at first mortgages originated in October 2013 and uses pre-2004 origination figures as the “normal” benchmark.

A Lopsided Rebound

For example: In 2003, 29% of first mortgages (the loan borrowers take out when purchasing a property) were given to consumers with FICO scores below 620. In October 2013, 0.3% of loans went to borrowers with such scores. Like applicants with low credit scores, those who can’t sufficiently document their assets are seen as higher-risk borrowers, and the market has a decreased appetite for such consumers.

Comparatively, other high-risk loans are hovering near pre-housing-boom levels, according to the report. This includes high loan-to-value mortgages (when the loan is more than 90% of the home’s value), loans to borrowers with a high debt-to-income ratio (when the borrower’s debt makes up more than 40% of their income) and purchase-money loans (aka seller-financed mortgages).

Lowering Your Risk

The good thing about credit scores is that they can be improved, but it takes time. And for someone with intermittent or difficult-to-track income, gathering the documentation required by mortgage lenders can be a tricky task. For these and many other reasons, it’s smart to start preparing to buy a home well in advance of the time you apply for a mortgage.

Once you start thinking about house hunting, you’ll want to check your credit reports and credit scores, since negative entries on your credit reports may hurt your chances of getting approved for a mortgage. Inaccuracies on credit reports are more common than you may think, which is why it’s a good idea to review your reports as often as you can. (Everyone is entitled to free annual copies of their credit reports from each of the three major credit reporting agencies.)

Checking your credit scores is easy and helpful, too. There are plenty of free tools available to assess your credit risk, like’s Credit Report Card. If you see a score lower than you’d like, it’s an indication you need to change some of your credit behaviors. That could mean reducing your debt load, making your bill payments on time or restricting how often you apply for new credit. The Credit Report Card breaks down the five factors that determine your credit score and allows you to see which areas require your attention. Whenever you’re checking credit scores, make sure you’re comparing the same model from month to month (or however often you can check them), because there are scores of different models, and you can only accurately gauge changes by periodically looking at the same score.

Keep in mind that if you wait to check your scores until right before applying for a mortgage, and you don’t like what you see, you likely won’t have time to change it. This is why it’s helpful to start early. Also, knowing ahead of time what you’ll need to present a lender when applying for a mortgage will give you a head start on collecting the paperwork you need to prove you’re a worthy borrower.

“Mr. John Consumer, we still have not received payment for services from your insurance company. If we do not receive a payment of $142.00 in the next week we’ll be forced to turn your account over to our collection department.” You would be fortunate to even receive a notice like this about a medical debt prior to reporting on your credit report. Most people do not.

Have any of you ever run into this dilemma before? If so, you’re certainly not alone. This happens tens of thousands of times each year. Either you don’t have medical insurance, your insurance carrier processes paperwork slower than your doctor likes, or perhaps there are some disputed charges that the insurance company will not cover.

The bottom line is that medical debts can easily turn into a medical collection nightmare. Medical collections can destroy credit scores as easily as any other collections. The most frustrating thing about medical collections, in most cases, the consumer is not the cause of a medical bill reporting to their credit report, yet they still pay the price.

Let’s face it; if we don’t pay our credit card bills then we know what could happen…collections. If we skip out on our apartment lease with six months left to pay then we know what could happen…collections. If we ignore our power bill for three months then we know what could happen…collections (in addition to being in the dark). But what we don’t expect is inefficient communication between our medical providers and our insurance company to wreck our credit profile.
An Industry Conflict
There is however a segment of the credit world that doesn’t care as much about your medical collections. Many lenders such as Automotive, Mortgage or Retail Banks do not include medical collections in the underwriting process and they can go ignored on a credit bureau. This is very much in line with what other industries have quietly been saying for many years. They simply do not view medical collections to be as damaging as non-medical collections or other negative credit data. So the question that must be asked is “Why do medical collections still lower your credit scores as much as non-medical collections?”

Here Are The Reasons

1. First and foremost, as long as Fair Isaac’s FICO® scores count them like any other collection, they will lower your scores. This isn’t a criticism of Fair Isaac, but it is a criticism of the credit reporting agencies.

2. As long as the credit reporting agencies allow collection agencies to report medical collections; then lenders, credit scoring models and insurance companies will see the scores that have been damaged by them. This could easily be changed if the credit bureaus would implement new policies to not allow medical collections to be reported if they were caused by insurance claim inefficiencies. This would put the burden of proof and the validity of the collection on the medical provider and reporting collector…as the Fair Credit Reporting Act intends.

3. Collection agencies would flip out if Fair Isaac or the credit bureaus changed the negative impact of medical collections to consumer’s scores. After all, what would be the motivation to pay them if they had no negative impact to your scores? Collection agencies are huge clients of the credit bureaus and they would throw their significant weight around if they ever found out that a movement was afoot to change how medical collections are reported or treated.

So What Do I Do?
There’s no easy answer to that one. Your best bet is to follow up on the claims process and read each medical bill for correct treatment and charges. If small enough pay the bill and wait to be reimbursed. Paying a small charge is a small price to pay to keep the billing error from reporting on your credit, which could cost 50-90 points on a good credit file.

In this case there is no simple answer or silver bullet. It’s a dreadful design error of the credit reporting industry. Until the architects of this industry decide to change the status quo, I’ll continue to get hundreds of emails from consumers or referral partners who have poor scores because their (or their clients) insurance company or medical provider don’t care to process paperwork quickly and efficiently.

Over the last 6 years, we have collectively removed thousands of medical collections from credit reports. Some were errors; others had been paid (by the insurance provider) and still reported to the report. Some were duplicates where multiple agencies reported the same debt over a period of time just killing the consumer’s scores. Pull your credit report(s) and inspect them for all types of errors. If you or someone you know needs help with a collection that has appeared on a credit file, call us for help on getting it removed. The process is simple but specific steps need to be taken.

Harry Snedden
ScoreCrafters, LLC

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