As lenders tighten restrictions on programs to avoid potential home foreclosures, credit repair companies are becoming a real hot item for borrowers with credit problems. But are the credit companies helping borrowers or are they actually following a dangerous practice?
Are poor credit scores keeping you from refinancing and avoiding possible foreclosure on your home? Call me today! Teaser lines from credit repair companies such as this are very tempting for homeowners concerned about their own home foreclosure. Faced with low credit scores and unable to qualify for low interest rate mortgage loans, many borrowers are now turning to credit repair companies to improve their credit scores. An old practice is now making new headway as borrowers face high interest rate loans and possible foreclosure on their homes.
Share the credit and share the scores--this initially was how a parent might help a child develop a credit rating--by adding him or her to the parent's credit cards as an "authorized user." Children on their parents' credit would benefit from the parents' high scores--the parents' good payment history would then flow to the children, establishing credit scores for them. Federal law allows authorized users to be added to credit card accounts; unfortunately, it does not regulate how many users can be added to one account nor does it prohibit the rental or sale of authorized user designations. Customers with good credit are adding people they've never met to their credit card accounts--for a price. Potential mortgage fraud results when credit card companies allow their customers to add unlimited consumers with poor credit to high-scoring credit accounts. When these consumers end up with (undeserved) higher scores they may get approved for mortgages they shouldn't have. So, what's the cost?
Companies that offer services like this often charge $750 to $2000 per trade line to consumers who wish to participate. First, you may in fact be committing fraud.
Second, you may not be doing yourself any favors. The reason underwriters don't want to approve you with your "real" score is that you may in fact be unable to make your payments and likely to end up in foreclosure--everyone loses, except the credit repair schemers who take your money, rip off your lender, and possibly cause you to lose your home.
There are numerous professionals who can help you plan for a home you can afford. Don't rely on those who will help you lose your credit, and possibly your home, by sucking you into a deceptive and possibly fraudulent practice.
Mortgage Credit Problems Columnist
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