There’s
absolutely nothing earth-shattering about this week’s edition of our lovely
newsletter. That doesn’t mean you should
stop right here and not read it; I’m just helping you set a suitable level of
expectations. Not everything I write can
be a literary masterpiece on par with To Kill a Mockingbird
or The
Lord of the Rings. I’m only human.
We’re
going to have a little refresher course on debt and how it can BOOST your
credit score. For those of you who are
playing at home, you’ll get extra points for neatness and essay-style answers. Now, let’s look at how four key consumer
loans can affect your mortgage worthiness:
Student loans
Because
these tend to take a while to pay off, they can help
your credit score if you pay your bills on time – you’re able to establish a
history of paying regularly. These loans count into your debt-to-income ratio,
so understand they do limit the amount for which you can qualify and borrow
until they’re paid off.
Auto loans
These
can also raise your score as you’ve demonstrated the ability to diversify the
types of debt you can carry. A big part
of the reason these play well into boosting your credit score is that an auto
loan is harder to get than a credit card.
Lenders look upon this favorably.
Payday loans
These
don’t usually show on your credit report, but if you default, that could ding
your credit. If certain circumstances
have brought you to the point of needing to obtain one of these loans, the most
important thing to remember, of course, is to pay it off on schedule or
sooner. Wiping that debt off your plate
will help have more cash available for other things.
Existing mortgage loans
Mortgages,
when paid on time, are great for your credit score. Conversely, missed
payments on previous mortgages will make your new lender nervous. Foreclosures, bankruptcies, and the like,
obviously, are other concerns that can adversely affect your mortgage
worthiness – but you already knew that, right?
Now
that we’re all on the same page, let me ask you just one question: If your client hasn’t led a perfect “loan”
life (as detailed above), do you want them to go to a lender who’s going to
“refer” them out to a credit-cleaning service (who will probably charge) or to
a lender who KNOWS HOW (free of charge) to help them clean and qualify? This is not a slam on a credit-cleaning
service at all, but they’re in the business to charge for a service – nothing
more, nothing less – and that’s the extent of their motivation. Sure, they want their customers to be happy
and have an improved score, but their fee is their ultimate goal.
Conversely,
we have a vested interest not only to show them how to improve their credit
score but to help them read and understand a credit report so they can see what
needs to be done to – and this is the payoff!! – get
that house. THAT’s our motivation, plain and simple. So, let me ask the question one more time: do
you want a mortgage company that turns this over to a third party, or do you
want us working one on one with your client?
Here’s a hint: it’s YOUR paycheck we’re talking about – control your
destiny or subject yourself to fate.
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