No credit or a bad credit score can be an obstacle to home buying, but you can offer advice to help clients improve their finances.
Al Goldstein, CEO of Pangea Properties in Chicago, has these five tips to pass on to your clients, which will help them take control of their credit.
1. Get a credit card…really! A credit card is a credit-building tool when used correctly. Goldstein suggests charging a few affordable purchases each month, and then pay the bill in full (before the due date), which will build up credit. However, it is important to not miss or make any late payments to avoid the interest backlash.
2. Keep an eye on credit card balances. On the other side of the coin, it is important to only use credit cards for purchases that could easily be paid out of pocket. Racking up big balances can hurt your clients’ score, regardless if the balance is paid in full. Let them know they should stick to 10 percent of the credit limit.
3. Review credit report and fix errors. Make sure your clients know they’re entitled to a free credit report each year, and they should get into an annual habit of requesting and reviewing their report. If they spot incorrect credit limits, closed accounts, or other errors on their credit reports, they should dispute them right away.
4. Leave paid debts on credit report. Not all old debts are bad, says Goldstein. Documentation of past debts, such as a car loan, provide a track record of how your clients have handled and paid debts, which can be good for their credit. The longer the history of good debt, the better it is for the score.
5. It doesn’t hurt to ask. If your clients have debt and are looking to pay it off quickly, simply asking the lender if they will lower the interest rate may work in their favor. If there are one or two late payments on their statements, suggest that they ask for a goodwill deletion, which can payoff in the long run.