Can Credit Repair Services Help You Buy a House?
If you’ve seen credit repair commercials on TV, you know that these services make some rather aggressive claims about how they can help you repair past financial mistakes. If you would like to buy a house in the near future, you may be tempted to see what they’re all about.
Unfortunately, many of these services can be a waste of your hard-earned money. Even reputable credit counselors may not benefit you in your plans for home ownership.
Beware of Credit Repair Scams and False Claims
The U.S. Federal Trade Commission (FTC) describes the key indicators of a credit repair scam, the first of which is requesting fees prior to doing any work on your behalf.
Beware of anyone who makes promises regarding their results or advises you to use false information. No reputable company will instruct you to dispute accurate information about your debts or past payment history.
Likewise, beware of anyone who tells you not to contact the companies who report credit information, including Experian, Equifax and Transunion. These companies are also required by law to inform you of your rights and accurately portray what they can do to help you.
At best, you will lose any fees paid to the individual or company. If you aren’t careful, you may find yourself the victim of identity theft or charged with committing financial fraud.
What About Credit Repair Counselors?
If someone identifies themselves as a certified credit counselor, verify their certification with the National Foundation for Credit Counseling (NFCC). But before you agree to participate in any program, it’s important to understand how this can affect your ability to buy a house.
Many counselors recommend that clients enroll in a formal debt management plan (DMP). Under a DMP, the counselor negotiates reduced payment amounts with your creditors and structures a repayment plan that you must follow. Although this can be an effective way to avoid bankruptcy, it will harm your credit rating rather than help it — at least in the short term.
To learn more about these programs, the FTC offers a comprehensive collection of information regarding DMPs and credit counseling. However, if you plan to buy a house in the next several years, this may not be the right approach for you today.
Effective Credit Repair Steps for Home Buyers
The most important point here is that no “magic bullet” can give you a fresh start or build great credit in a short time.
The most effective way to build your credit score in advance of buying a house is to talk with a reputable mortgage lender or broker about your financial history. Your lender can go through your credit report with you to identify ways to clean up any outstanding issues. This may involve resolving outstanding debts with your creditors or contacting Experian, Transunion and Equifax to dispute inaccurate information.
Your lender or another qualified financial advisor can also recommend financially sound strategies for building good credit and saving money for your down payment and closing costs.
The Edie Israel Team provides professional real estate representation to home buyers and sellers in Southern California. Although we can’t provide financial advice or recommend a credit repair service, we can suggest reliable strategies for finding a lender who is well-suited to your needs. Contact us today to learn more about our Yorba Linda CA real estate services.