Repairing the Reputation of Credit
DECEMBER 2013 n Missouri Mortgage Professional Magazine n
NationalMortgageProfessional.com
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By Doc Compton If you’re one of the credit bureaus, or the people who sell their reports, you’ll swear that it’s a complete sham. If you’re a lender, you either love it or hate it, depending on your past experiences with it. But if you’re one of the millions of consumers with errors on their credit report, it’s a godsend. Who’s right..? All three …
an 800 number and the promise of a fresh new start, line the roads throughout my city. Radio and TV ads that make ridiculous guarantees bombard the airwaves, and print ads that offer too-good-to-be-true results to the disenfranchised and fill mailboxes from coast to coast. And all of this leaves me to wonder: Where is this industry, one that’s been so good to me for so many years, headed? But before I try to answer that, let me elaborate on my first few statements.
Let me explain … I have been doing credit repair for nearly two decades. Initially, I needed it for myself, then I did it as a favor to friends and family, and eventually in 2004, I founded a registered credit services organization. Since then, I have seen a lot of changes in the credit repair industry—some good, some not-so-good. I’ve been through ups and down in the real estate and mortgage markets, and I’ve watched credit repair companies come and go, with only a few remaining afloat, mine among them. I have made consumer credit my career. And in the wake of a terrible recession, caused in part by the mortgage crisis, credit repair companies have begun to pop up everywhere. Cardboard “bandit signs” at busy intersections and billboards with
The credit bureaus … Plain and simple, the credit bureaus think what we do is a scam. Or do they? In a recent article on Yahoo!, I pointed out the similarities between credit repair and rapid rescoring. I detailed how, for nominal fee, inaccurate, incomplete, erroneous, outdated or unverifiable information could be removed from consumer credit files and create an increase in their scores that could mean the difference between a loan being approved or declined. And then I talked about credit repair. Here’s the thing … the companies that lenders purchase their tri-merged credit reports from purchase the same data from the bureaus that any consumer could, but in a concise, easy-to-read format. In other
words, they’re a customer of the credit bureaus. A customer that is happy to sell–with a slight markup–the same information to lenders as a third party. And what’s a lender to do if they happen to pull one of the millions of credit files with an error in it? They pay to have it fixed. Seems legit, right? Of course it does, so long as the thirdparty reseller (read, “bureau customer”) makes money doing it. But credit repair companies, if everything else is assumed the same about the process—an error is found, a fee paid, the credit repaired, scores raised—are consistently labeled as a scam by the bureaus. The whole thing sort of leaves me scratching my head.
What about lenders? I was speaking to a large group of lenders several years ago, when I was asked a tough, but fair, question. “Yeah, but as a credit repair guy, don’t you feel a little bit like the defense lawyer that gets someone off on a murder trial for a technicality?” I thought about it for a minute, before said, “Yeah, I suppose I do. But let me ask you something … If you were wrongly accused of murder, would you care if I got you off on a technicality?” The answer you get about whether credit repair is a legitimate industry
depends exclusively on which lender you talk to. Many lenders have had a less-than-favorable experience, because they enlisted the help of a less experienced or perhaps even disingenuous company. Perhaps they referred a borrower to a company that they knew little about, only to have the client return upset, because the results weren’t there. Or maybe a commissioned salesman promised more than his or her company could deliver. Either way, the borrower’s money was the only thing gone, and the results simply never came. Most lenders would be hesitant to refer a borrower to a credit repair company after an experience like that, and I wouldn’t blame them. However, in the interest of customer service and getting a loan closed, many offer to do some of the repairs for their client, manually or via rapid re-score. Others might suggest that the borrower do it themselves. Some might even go as far as to provide the borrower with template letters for the purpose of disputing inaccurate information. Unfortunately though, many opt to simply decline the loan, and offer no alternative for the prospective homebuyer. On the other hand, there are legions of loan officers who will absolutely swear by what we do. Having been a