7 June 2012
By Graham Doessel, Founder and CEO of MyCRA Credit Rating Repairs and www.fixmybadcredit.com.au.
Credit reporting is governed by mountains of legislation across different industries. Often we can assume that this system is working, but in reality it doesn’t always work effectively.
The fall-out from this is credit rating errors on consumer and business credit files that affect your brokerage business.
Here are 7 myths about credit files that could be costing you thousands in lost commission:
1. Consumers always know they have bad credit before they apply for a loan.
Many brokers assume if a client’s credit check reveals a negative listing on their credit file that wasn’t disclosed, they must have been trying to hide it. Whilst this is sometimes the case, there can be many reasons for people not to know they have bad credit until they apply for credit.
If your client has moved addresses they may not have received the appropriate warning notices or notification of the credit listing; or they may have been the victim of identity theft; been hospitalised; been incarcerated ; been traveling overseas or been a victim of a system error or human error with the creditor.
All of these instances can see people end up with a bad credit listing without them knowing it. In many instances the listing has been placed on the credit file unlawfully. Rather than turn these clients away, why not refer them for credit repair.
2. Credit file listings are always correctly placed on credit files.
Credit reporting mistakes can and do happen – and it is up to the consumer to ensure that their credit file reads accurately. But if many are not aware they even have bad credit, many more are unable to recognise credit file errors.
Wrong names, wrong addresses, incorrect notification provided, a Creditor not adhering to the letter to credit reporting legislation, and a Creditor entering a listing which the Client believes should not be there can all potentially be grounds for requesting for the removal of the listing. Credit file errors happen every day. So if the client is at all unsure about the validity of the listing, and the method in which it was listed, they are likely candidates for successful credit repair.
3. Credit file complaints are easily disputed.
Some brokers assume that if the listing should not have been there, that it should be fairly easy for the client to request its removal. They assume if the listing is still there – the client must be deserving of it.
In reality, once a listing has been placed on a credit file, it is very difficult to have removed. So even if the listing shouldn’t be there, most often clients are forced to put up with it for 5-7 years, depending on the listing type. Often clients are told the listing can be marked as paid, but will not be removed from the credit file (unless of course they are lucky enough to know about professional credit rating repair).
4. If a Default or Clearout is on the credit file it can never be removed prior to the end date.
On the other hand, if brokers are aware how difficult removing adverse listings can be, sometimes when they see the option of credit repair, they assume it must be a ‘con’, as in their experience listings are never removed from a credit file before the drop off date.
In truth, unless the client can show why the listing was placed unlawfully on the credit file it will not be removed. So in the case of overdue accounts that have been listed as defaults or clearouts on the credit file, it is up to the client (or the credit repairer acting on their behalf) to show reason as to why the listing was placed unlawfully, and negotiate the listing’s removal.
There is a lot of legislation which clients need to be up to speed with and it is very difficult for them to apply the letter of the law to their own circumstances – which is precisely why people assume it can’t be done.
The process of credit repair involves the investigation of the credit file, the request for information on the account from the Creditor, and the determination based on legislation as to whether the credit listing was placed unlawfully on the credit file. If this is determined, the credit repairer will formally negotiate the removal of the listing from the credit file on the client’s behalf.
Whilst currently there is no legislative obligation for the Creditor to remove the listing, escalation of the complaint to industry Ombudsmen and the Privacy Commissioner can all improve the chances of removal in justified cases. This legislation is also set to change in the coming months to improve credit listing complaints processes.
5. Bad credit clients aren’t worth the trouble.
If you have done a lot of work with a client, only to find out they have bad credit it can be tempting to close the door on them and move on to someone who can be helped more easily. It is true bad credit clients will be rejected by mainstream lenders, but in the interests of good customer service, we should look at alternatives before turning them away.
You could refer the client for assessment for credit repair as a first option. It saves you time, the credit repairer does all the work from there, and if the client should otherwise qualify for a loan apart from their bad credit, it makes sense to ascertain whether that bad credit history can be removed prior to looking at other options for lenders or simply turning them away.
6. A bad credit client should be steered to the non-conforming market.
Instead if you look at your duty of care to your clients, and you believe the client should be able to obtain credit, then the non-conforming market may not be the best option as a first step.
It would seem fitting that it be ascertained whether or not the bad credit history is valid before providing non-conforming loan options to them.
As a successful broker in the non-conforming market for many years, with many cases I was left scratching my head as to why these perfectly suitable clients who had nothing wrong bar their credit rating errors did not have other options than to enter a loan at sky-high interest rates just to break in to the property market. That is precisely why I founded a credit repair business in the first place.
7. Credit repair is a waste of money.
Credit repair is not cheap, but it’s not easy either. And it is certainly valuable. You could actually be saving yourself and your clients tens of thousands of dollars.
On a standard loan of $350,000,a client would pay $487.62 more in interest each month in a non-conforming loan at 9% over the first three years of the loan when compared with the standard variable rate of 7%.
When we look at that in total, the client would be up for a staggering $17,554.34 more just in interest alone over those first three years. It is well worth considering clearing the client’s bad credit and getting them into a standard loan as a first option.
You can generate goodwill from clients who are saving money and potentially generate great income for yourself.
Credit rating repair is not suitable for everyone. But for most people who get taken on, the success rate is high. For example, MyCRA have a proven track record of up to 91.7% success rate for every case they take on. This means that whilst not every file can be cleared, there is a good chance.
If you had only two clients returned to you every month with a cleared credit file it would add $52,120 per year in lost commission to your income. This figure is based on closing two extra deals for mortgages of $355,000 each month, with an upfront commission rate of 0.6%.
$355,000 x 0.6% comms = $2130 commission
2 per month is $4260 per month x 12 months (or 24 a year) = $51,120 in comms
So if you are keen on helping those people you thought were lost, why not go back through your existing databases and restore some hope to those clients that you had previously turned away by referring them for credit repair.
About Graham Doessel and MyCRA Credit Rating Repairs.
Graham Doessel is the founder and CEO of MyCRA Credit Rating Repairs – Australia and New Zealand’s leading credit rating repair specialists.
Graham’s origins are in finance, and he formed/owned the award-winning non-conforming brokerage “Mortgage Now.”
Graham is a consistent spokesperson in the media for credit reporting issues in Australia and New Zealand.
MyCRA Credit Rating Repairs, now in its fourth year of operation, has recorded an impressive track record of up to 91.7% rate of removal of inconsistent or inaccurate negative data from the Australian and New Zealand credit reports of both consumers and commercial entities.
MyCRA Credit Rating Repairs is nominated for the 2012 Telstra Small Business Awards and was placed 24th in the 2012 Start-Up Smart Awards.
Graham Doessel – Founder and CEO MyCRA Ph 3124 7133
Lisa Brewster – Media Relations MyCRA Mob: 0450 554 007 firstname.lastname@example.org
MyCRA Credit Rating Repairs is Australia’s leader in credit rating repairs. We permanently remove defaults from credit files.
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