If you’re into real estate investing or are diligent about your financial profile, you understand that credit is one of the most important factors that affects your financial viability. Your credit strength determines your access to capital, including the amount of leverage you can get approved for, at what terms and at what interest rate. Bad credit makes you unfavorable to lenders and thus you get unfavorable rates and terms — that is, if you are even fortunate enough to be approved to get funding in the first place. Many people are aware of that, but many do not know that having poor credit can also affect your ability to get a job, the cost of your home utilities, and your rates for insurance.
Yet unfortunately, according to a 2016 Credit.com study, nearly a third of Americans have a credit score that falls below a 601 FICO Score which is the threshold that marks you as having “bad” credit. Maybe even worse still, is that there are millions of people out there that have never established ANY credit. With credit being such an important factor to your financial strength and with so many people needing help improving their credit, they often turn to credit “repair” or credit “restoration.”
Every Monday night at La Rouge Restaurant and Lounge, Alpha Developments & Investments and its founder Benedict Guerrier host a different guest speaker at the NJ’s Entrepreneurs Investors Haven in Real Estate Meetup. This week we gained a wealth of knowledge about credit from George Cole, CEO of National Credit Educational Services, a non-profit credit restoration organization based in Atlanta, GA.
One of the first myths about credit that Mr. Cole dispelled was that the major credit “bureaus”, (Experian, Equifax, and TransUnion) are not part of the federal government and not affiliated with the IRS in any way. They are in fact FOR-PROFIT organizations that experience huge profits from their reports and services they provide to individuals, banks, and service providers. So, in turn, he refuses to call them “bureaus” but refers to them as simply, “companies.”
The next thing Mr. Cole wanted to be very clear on was that “credit repair is reckless.” According to him, credit repair is an archaic practice and companies use a cookie-cutter approach that can completely purge your credit history, doing away with the bad, but at the expense of also deleting the positive marks such as having a long-standing credit relationship with a vendor that has been paid in full. Also, many credit repair companies make bold claims that they can get you a 750+ credit score to entice you to use their services without having learned anything about your financial profile.
By contrast, his organization specializes in credit “restoration” which takes a personal, customized approach to helping someone improve their credit by first educating them about good financial practices, helping them establish a realistic budget and repayment plan, helping them avoid debt collection agencies, and finally, getting clients out of debt that they are no longer required to pay according to rules laid out in the Fair Debt Collection Practices Act.
If you are interested in investing in real estate or just want to eliminate the negative stigma attached to your name every time you apply for a loan, or an apartment, or a job, maybe it’s time to seek professional help. If you have had some setbacks in the past, it is never too late to start improving TODAY. Start the process of getting back on track in order to fulfill your financial goals.