Gene offers excellent advice on how to manage your credit before it becomes a problem.
It’s not hard to find advice on a full-range of credit issues today. Experts (or so called experts) are everywhere. So I find that most of my clients come to me already understanding that credit scores are very important … and growing more so each day.
But experience with Borrowers pertaining to credit managementhave made it abundantly clear to me, that way too many do not spend enough time or pay the proper attention to their finances. That simple stepsneeded for credit maintenance are often overlooked, forgotten, or dismissed.
I find that in most cases I see, that poor credit scores arenot the result of malicious intent towards spending itself. Rather it’s a lack of understanding of how spending, payment,or non-payment of financial obligations reflect on their credit report (and when those become reflected there) that cause them issues.
This basic misunderstanding, paired with a somewhat cavalier attitude towards credit management, is what leads me to believe that courses addressing credit and credit management are needed (and by that, I mean should be mandatory) in our high schools. And in some areas, they are.
These courses are most beneficial and timely when they areoffered prior to a child heading-off to college or entering the adult world. Prior to a time when they can start doing damage to their credit standing. How to establish, then maintain a proper credit score should be the focus of these classes.
I’ll illustrate examples of how “not knowing” how to manage credit adversely effected two hopeful Borrowers …
In one case when my Borrower came to me, he had several “bruises” on his credit, including a prior income tax lien. While my client had paid and satisfied the debt (done through garnishment of his wages via his paycheck) and there was no longer a balance owed, neither the IRS or the client had notified the Credit Bureaus, those being Experian, TransUnion, and Equifax, of that satisfaction being accomplished.
In the second example, a judgment had been court ordered against my client. A public filing, again resulting in a wage garnishment, had been inacted. And once again, the debt had been fulfilled in its entirety without any of the participatingparties reporting it to the 3 Credit Bureaus.
In both cases, the debts still appeared as though they were still owed, according to the “known” status of the account. Since judgments and liens must be paid in full … AND require an actual written “Release” be issued and recorded by the local court jurisdiction (typically the County Recorder or Clerk of the Circuit Court), a very integral part of the repayment process was missed.
In both instances, my Borrowers argued that it was someone elses responsibility to have seen that the “Release” was filed and recorded. And there may have been some truth to their arguments. But the bottomline is … no one is more effected than the client if the Release is not recorded. So it’s ultimately theBorrower’s responsibility to see that their account status is correctly updated.
I will also point out that in both cases, the Borrower did not know that their Release had not been recorded. Neither client had followed-up on that important step or taken the time to check their credit or credit standing … until they made mortgage application with me. And then of course, precious time was lost to clearing each lien/judgment so mortgage processing and purchases could proceed.
The wheels of credit and credit repair do not turn quickly. Valuable time is lost while searching for past documentation, older statements, or proofs of payment. Often, a Letter of Explanation must be written by the Borrower addressing the circumstances still showing on Credit Reports. Reviews and updates must then be made by the Credit Bureaus. All this ends-up taking place during contract time constraints and under stressful situations.
Remaining educated, paying attention, seeing to details,taking charge of your own finances, credit, and credit management … are positive and pro-active actions that everyadult should take. That is true, whether they are hoping to buy a home or not. The best management, best pro-active action can be taken relatively quickly and simply … by running your credit report at minimum, on an annual basis. Go to www.annualcreditreport.com for your free annual credit report. Or contact me, should you be hoping to buy a home or refinance in the future.
Credit and Credit Management: Reasons to Pay Attention. If these two issues became “non-issues”,the number of mortgage approvals would rise dramatically. I’m hoping by educating and raising awareness regarding both, I can help do just that.