Advice for Homebuyers on Credit and Debt

In this week’s FinTalk, Steve Ely, CEO of eCredable , provides practical social education content on the 3-for-1 benefit of paying down a credit card, Jeffrey Walker, CEO and Co-Founder of CredEvolv , provides tips to educate consumers on improving their credit scores, and Douglas Wilber, CEO of Denim Social by Capacity , talks about the importance of focusing on customer relationships rather than transactions to increase your sales opportunities.

The total amount of credit card debt in the U.S. recently surpassed $1 trillion. ?That’s a staggering amount of money people owe to the issuing banks, which includes an equally staggering amount of interest consumers are paying on this debt. If you’re contemplating buying a house anytime soon, paying down credit card debt provides a 3-for-1 benefit:

• Better Credit Score – Your credit score is made up of these 5 components. The good news is that 65% of your score you have significant control over. Make your payments on time and limit your “credit utilization” to less than 30% of your available revolving credit lines (like credit cards). Paying down credit card balances will yield a better credit score, which means better terms when you apply for a home loan.
• More Money for a Down Payment – No matter which type of loan you are applying for, the more money you have for a down payment the lower your monthly mortgage payment. Paying down credit card debt allows you to reallocate these funds to your down payment.
• A Lower DTI – Your debt-to-income-ratio is a key factor in getting approved for a loan. If you have a borderline ratio, paying off your credit card debt will lower your DTI.

You can improve your credit scores by first fixing errors in your credit history (if errors exist) and then following these guidelines to maintain a consistent and good credit history. Repairing bad credit or building credit for the first time takes patience and discipline.?There is no quick way to fix a credit score.?In fact, quick-fix efforts are the most likely to backfire, so beware of any advice that claims to improve your credit score fast.

The best advice for rebuilding credit is to manage it responsibly over time. If you haven't done that, then you'll need to repair your credit history before you see your credit score improve. Here are three steps I often share with borrowers to improve their credit score:

1. Check your credit report for errors.

Carefully review your credit report from all three credit reporting agencies for any incorrect information. Dispute inaccurate or missing information by contacting the credit reporting agency and your lender. Checking your own credit report or FICO Score has no impact on your credit score.

2. Pay bills on time.

Making payments on time to your lenders and creditors is one of the biggest contributing factors to your credit scores—making up 35% of a FICO Score calculation. Past problems like missed or late payments are not easily fixed.

• Pay your bills on time.
• If you have missed payments, get current and stay current.
• Be aware that paying off a collection account will not remove it from your credit report.
• If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor.

3. Reduce the amount of debt you owe.

Your?credit utilization, or the balance of your debt to available credit, contributes 30% to a FICO Score's calculation. It can be easier to clean up than payment history, but it requires financial discipline and understanding the tips below.

1. Keep balances low on credit cards and other revolving credit.
2. Pay off debt rather than moving it around.
3. Don't close unused credit cards as a short-term strategy to raise your scores.
4. Don't open several new credit cards if you don't need to increase your available credit.

It’s time for some real talk…

Most, if not all, mortgage brands are highly undifferentiated.

Most lenders’ products are highly commoditized.

In a market like this, what makes the difference? The relationships that loan officers can build with their clients and the community they serve. Case closed. Except…

The problem??

Most LOs have been trained to think about the world through the lens of transactions, not relationships. And it makes sense…during the refi boom we recently experienced, the LO who got to the borrower first won.

But now things are different. LOs must quickly pivot away from thinking about customers as “deals” and start thinking about them as real people. Real people with real hopes, dreams, and aspirations that are much harder to achieve in the current rate and inventory market.

Every loan officer needs to differentiate themselves as a resource…a guide…a partner for borrowers to help them navigate these turbulent waters.

And, in today’s digital landscape, being a resource means meeting people where they are. And where they are is on social media. Activating mortgage loan officers in a social selling strategy is a key way to expand reach, drive engagement, and humanize the brand: those who engage in social selling achieve 45% more sales opportunities and are 51% more likely to hit their sales quotas.?

However, it all comes back to the strength of relationships fostered over time. Good selling starts with genuinely listening to customers and being authentic, no matter what. Loan officers must genuinely care about customers’ needs to find the right solutions and demonstrate that level of care to earn the necessary trust. And, when it comes to social, this authenticity needs to shine through.

Here’s how loan officers can use social media to make their customer relationships stronger:

View social media as an opportunity to provide value. We already know that authenticity is important to customer acquisition. That same authenticity should show up in social media activity.

Lean into the power of real-life experience. There’s a good chance that loan officers live and work in the communities they serve. Showing on social media what’s happening in their communities will help foster a sense of belonging and drive interest among followers.

Embrace storytelling. Too often, social media marketing for loan officers consists only of market statistics or data points. While this type of content can absolutely be useful and helpful, it’s not enough on its own.?

Be themselves. If loan officers are only professional and stuffy, audiences won’t connect. They shouldn’t be afraid to let a little personality shine through on social media. Thought leadership can create credibility and demonstrate expertise, and it’s always better received when served up by a real-life person.

Building authenticity through social media is similar in principle to building authenticity in real life; it’s just using a different medium to do so. When loan officers share personal stories and helpful content with clients in a way that reflects their true personalities, they’ll build lasting relationships both online and offline that will serve as the foundation of sales for years to come. Prioritize people: the sales will follow.?

See how Dart Bank used social media to strengthen customer relationships in this case study.?