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Destiny or Fate (Posted May 30, 2016)

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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