Ensuring Your Clients’ Credit Scores are Accurate

As a mortgage broker, you know that helping your clients secure a mortgage is more than just a house deposit. Individuals look to you for guidance on many things that attribute towards the home loan application. This is where your role in ensuring your clients’ credit scores and credit reports are accurate, and why this is pivotal in this process.

As you already know, lenders use an applicant’s credit score (or credit rating) to decide whether to lend them money. And ensuring your clients credit score will enable you to better negotiate loan terms and interest rates with lenders on behalf of your client.

So, what discussions should you be having with your clients to help them understand credit reports and to ensure the information presented in them is accurate?

1. Understanding Credit Reports

Remember that just because you understand it doesn’t mean your client will. As mortgage brokers, working with credit reports every day, it’s easy to forget that this might be a new and complex area for your clients. Recognising this is key to effectively guiding them through the process and ensuring they fully understand before they make one of the most significant purchases they’ll ever make.

Firstly, explain the components of a credit report. Credit reports include your client’s credit rating, credit products, repayment history, financial hardship information, any defaults on utility bills, credit cards and loans, credit applications, bankruptcy and debt agreements, and credit report requests.

Secondly, articulate how a credit score is calculated. They’re calculated on the amount of money they’ve borrowed, number of credit applications they’ve made, and whether they’re paid on time.

Then, its necessary to stress the significance of accurate information and how errors can impact their credit score and eligibility to obtain a mortgage. Then, you can easily move into the next step of reviewing the credit report.

2. Reviewing the Credit Report

Remembering that credit reports may be a new and complex area for your clients, it is best you work with them. Assist them in obtaining a free copy of their credit report. There are three major consumer credit reporting agencies, and it is up to you where you wish to take your client.

Because you explained the components of a credit report in step one, reviewing the sections of the report will be less complex. Go through each section of the report with your client. Ensure that you are looking for discrepancies in personal information, account details and credit inquiries. This is to ensure that the credit report is accurate, which is pivotal for your client before applying for a loan.

3. Identifying Common Errors

Here are a few common errors that, with your help, your client should be looking out for:

• Personal Information: It is fundamental that personal details are correct.
• Account Errors: Identify and address any accounts that are not your clients, incorrect account statuses (e.g., showing an account as open when it’s closed), and wrong balances.
• Duplicate Accounts: Ensure no accounts are listed more than once, as duplicates can skew your client’s debt-to-credit ratio.

4. Disputing Errors

So, your client has found an error in their credit report.  Having an error may affect your client’s ability to apply for a loan. Fixing the error is essential.

Guide your client on initiating the dispute. This typically involves contacting the credit reporting agency with details of the error and supporting documentation. Then. encourage them to follow up on disputes and ensure corrections are made. As part of positioning yourself as your client’s trusted adviser, you may wish to provide templates or resources on how to best initiate the dispute.

5. Building Good Credit

It’s also essential to help your client understand what contributes to a good credit score. This will help you negotiate better loan terms and interest rates with lenders on behalf of your client. Here are ways your client can improve their credit score:

• Timely Payments: Emphasising the importance of making payments on time can not be understated. Your client’s payment history is a significant factor in credit scores. So, discuss with your client the necessity of paying bills and rent on time, as well as paying loans and credit cards on time.
• Credit Utilisation: How much credit is being utilised versus the total credit limit? Maintaining a low credit utilisation ratio helps to increase your client’s credit score.
• Credit Applications: Does your client understand that each credit application is added to their file and temporarily lowers their score? Avoid making multiple credit applications within a short time to lower this risk and impact.

Transparent Discussions on Credit Reports

As a mortgage brokers, you can empower your clients to achieve accurate credit reports, ultimately facilitating smoother mortgage approval processes and helping them secure better loan conditions. By having thorough and transparent discussions, you’re educating your clients and positioning yourself as their trusted adviser in their financial journey.

At Vision Aggregation, we equip all our brokers to have the right conversations with their clients. Your success is our success; we are committed to providing the right knowledge and resources to ensure our brokers’ businesses thrive. If you want to find out more on how we can support you, your business and your clients, contact us today.