12 Essential Facts About CREDIT REPAIR

Bond Market Does Not Expect High Inflation

I recently listened to a podcast guest explain in no uncertain terms why we’ll soon see 15% inflation! But, a few hundred thousand bond investors clearly didn’t get that memo, as rates edged lower today.

If you believe in the “Wisdom Of The Crowd” at all, you might want to believe that double-digit inflation is not on the horizon. Thousands of bond investors (the “crowd”) would not accept a 10 Year Yield of 4.4% if they thought 15% inflation was imminent.

12?Essential Facts About Credit Repair

We spent $600 out of our own pockets repairing a borrower’s credit a few years ago – only to see him use another lender. It was painful to say the least, but it’s an excellent segue into my first essential fact.

1. Lenders cannot charge borrowers for credit repair – even at close of escrow. This is ostensibly to prevent lenders from charging borrowers for services they don’t need, but it is actually another example of ridiculously stupid regulatory overreach. Lenders in general now encourage credit repair far less often because of the expense and the risk to the lender. This is too bad because borrowers typically benefit tremendously from credit repair – and I don’t know of any lenders that made money from credit repair; they merely passed on the exact cost, as required by law.
2. Most lenders now only do credit repair when borrowers are in contract. This is so they can at least recoup a portion of the cost out of their commission.
3. Borrowers in need of credit repair often need longer escrows of at least 30 days. This gives lenders enough time to repair credit via “rapid rescores.”
4. Credit repair is often unnecessary for first-time homebuyers. If a buyer is getting a Fannie Mae or Freddie Mac loan, credit repair is usually unnecessary, as first-time homebuyer rates are not impacted by credit scores. The exception would be for jumbo, FHA, VA, and non-QM loans – as they are all still impacted by credit scores even if the borrowers are first-time homebuyers. First-time homebuyers might also need credit repair if their credit scores are below “minimums,” e.g. 580 or 620, or if they have collections or charge-offs that need to be addressed.
5. Slow credit repair is often free, while fast credit repair (rapid rescore) is not. Fast credit repair involves a “rapid rescore.” Rapid rescores require borrowers to provide proof that accounts are paid off or paid down to the three credit bureaus. The bureaus then use that info to calculate new credit scores – taking about 5 days in most cases. Rapid rescores can cost anywhere from $100 to $1,000, depending on the number of accounts that need to be updated (the bureaus charge per account). Slow credit repair involves paying off or paying down accounts, and then just waiting for the credit bureaus to update their info and scores via the normal data collection and reporting process – which can take anywhere from 30 to 60 days.
6. Lenders can run “what if” scenarios for borrowers at any time. Lenders have software available that allows them to run “what if” scenarios that allow them to see what will happen if various accounts are paid off or paid down. Borrowers can follow those prescriptions and then see their credit scores increase in 30 to 60 days – without paying for any actual credit repair.
7. Credit repair can easily lower a person’s interest rate by as much as 1%. This is because of the massive impact credit scores have on interest rates.
8. Borrowers with credit scores under 740 should always ask about credit repair. This is once again because credit scores can impact interest rates significantly.
9. Borrowers often only need to fix credit on two of the three credit bureaus. This is because lenders often correlate to the middle of the three credit scores provided by the three credit bureaus, so one very low score is often not an issue.
10. Borrowers should be aware of credit repair companies that are effectively scams. These companies charge extra for what many lenders will do for free, and they also try to impose monthly service fees for monitoring services that are unnecessary.
11. If credit is particularly bad, most lenders refer borrowers out to reputable firms that specialize in complex credit repair. Some borrowers have credit that is simply too messed up for a lender to help fix.
12. Credit repair is not magic, and it requires effort on the part of the borrower. Some credit repair solutions are amazingly easy, as they simply require paying down a few accounts. But, no matter what, borrowers need to follow the prescriptions carefully and provide essential documentation when necessary.