Now that short sales are such a large portion of the housing market, we should expect to see more home buyers using a credit repair company to help re-establish themselves as credit-worthy for new home loans. Considering that a majority of home sales in Tallahassee are going to be distressed property, I felt it would be prudent to report how credit repair works and what future homebuyers can expect from these types of operations.
The first thing that I learned when researching what to expect from a credit repair company is that many of these operations are not on the "up and up." It is very important that anybody with damaged credit first do their homework before just paying the first credit repair site to magically promise them an instant 800 credit score .... because that is not going to happen.
Credit Repair: A Legal Solution For Homebuyers With Damaged Credit
The Fair Credit Reporting Act (FCRA, passed in 1970) provides consumers with rights, and specifically the right to have the information about them reported accurately. All reported information must be verifiable, and if disputed by the consumer, must be given a detailed response in a certain amount of time (30 to 40 days I believe).
And why do you think this law was passed? Because many credit reports are not accurate and contain errors. The Federal Trade Commission receives scores of complaints about the credit bureaus, almost more than any other industry.
The other law that protects you is CROA, the Credit Repair Organizations Act. If credit repair was illegal then there would not be a law governing Credit Repair Organizations.
Watch Out For Credit Repair Scams
Just as we project a rapid growth for the credit repair industry, we will no doubt begin to see more and more credit repair scams. It is only natural to assume that there will be those who do not operate within the law, so I would recommend two key points to ensure that you do not fall for a credit repair scam:
- Understand the process that the company will use - For most people, it took some time to damage their credit, so a credit repair program that offers immediate results is most likely a scam. Remember, a legal credit repair company has a process to help people with damaged credit, but they will not get somebody's credit repaired overnight (or even in a month or two). A quick repair could take four months, while most would take nearly a year to complete.
- Do your homework - Do not grab the first company you find through a google search, rather thoroughly research to find a company that is proven to be successful at credit repair. Make sure the company provides proof of success and that their past clients provide glowing testimonials.
How To Buy A Home While Working With A Credit Repair Company
For our long-time readers of the Tallahassee Real Estate Blog, you probably already know the answer to this ... Do a lease-purchase! We refer people to a solid credit repair company while we help them purchase a home. The great news is both can happen simultaneously.
We can do the following steps, in conjunction with hiring a credit repair company, to get homebuyers into homes right away:
- We refer our homebuyers to the US Consumer Credit Restoration Association
- We provide our homebuyers with a list of homes where the sellers have expressed an interest in receiving a lease-purchase contract
- Our homebuyers preview the homes they like on the list
- Joe Manausa Real Estate prepares offers and finalizes contracts between the homebuyers and sellers
- Joe Manausa Real Estate arranges for a lease agreement between the two parties
- The homebuyer moves into the home under a lease agreement and then closes on a new home loan when the credit repair helps them achieve a home mortgage loan
This process might seem long or confusing, but I can tell you it is not. Too many people think that it takes 7 to 10 years to fix their bad credit, but the reality is that it can be done much quicker and it does not need to stop them from achieving and maintaining the American Dream of home ownership.
Joe Manausa, MBA is a 26 year veteran of real estate brokerage in Tallahassee, Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.