Wednesday, September 12, 2007

The inevitable rise of credit repair

Companies that exist to help borrowers repair their credit while they're still in the lender's pipeline have been around for some time now. In the past, when it was easy to find a program for any borrower -- and the further down the credit spectrum that borrower fell the more profitable the program for the broker -- these services were a tough sale if you targeted the lending community. Not so today.

When it becomes impossible for a broker to find a program for a C-credit borrower, it is suddenly very important to find a way to make that borrower look like a B-credit risk. I'm already getting e-mail solicitations from companies that say they can do just that.

The repositories (and Fair Isaac) are more sophisticated now than they were back when I was responding to consumer complaints as operations manager of a credit bureau affiliate. But there are still tricks that can mess with a borrower's file in the short term. Eventually, any accurate but negative trade lines will reappear on the borrower's file.

Making a loan for a borrower with a credit file in dispute is risky business because it blurs the picture the lender has of the borrower's actual ability and/or willingness to repay. That's like making an ARM loan to a borrower who can make the payment today but doesn't stand a chance of doing so after the loan adjusts. Oh, wait...

I read recently that experience is helpful because it helps us recognize mistakes...when we make them again. I hope that was tongue in cheek.

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