Credit Help with HUD Credit Counselors

Certified Credit Counselors are...

•Trusted, independent non-profit advisors
•Advise consumers on managing their money
•Offer solutions to reduce or eliminate debt loads
•Develop personalized action plans to help prevent future problems

Provide:

Credit Counseling

Debt Management

Don’t Provide:

Credit Repair

Debt Settlement

CREDIT HELP

The number one issue that stalls clients from purchasing a home is some sort of credit issue. Either credit needs to be corrected, built when a client has no credit, or credit scores need to be increased. Also, many past students are needing help to refinance student loans to make commensurate with current income. Certified credit counselors use credit tools available through credit reporting agencies and let you know how to improve credit and how long this will take. 

Certified Credit Counselors

Credit counseling provides guidance and support on consumer credit, money and debt management, and budgeting. The objective is to help a client avoid bankruptcy and to provide primary financial education on managing money. Borrowers with an understanding of money management are assets for lenders as well. Many counseling services also negotiate with creditors on behalf of the borrower to reduce interest rates and late fees

Credit: Short Term Help (max.1 yr)

Credit counseling includes:

  • Correct credit issues

  • build credit

  • improve credit scores

 

Work with a certified credit counselor to get credit issues resolved​ within 1 yr timeframe.

 

Credit: Long Term Help (1-5 yrs)

Credit counseling includes:

  • Correct credit issues

  • Build credit

  • improve credit scores

  • Debt management plans

  • Debt consolidation

  • Student loan counseling/debt management

  • Bankruptcy counseling

  • Modification counseling

  • Foreclosure counseling

 

​Work with a certified credit counselor to get longer term credit issues resolved​ within 1-5  yrs.

 

Foreclosure Counselors

HUD-approved housing counseling agencies are available to provide you with the information and assistance you need to avoid foreclosure.

Foreclosure prevention counseling services are provided free of charge by nonprofit housing counseling agencies working in partnership with the Federal Government. These agencies are funded, in part, by HUD and NeighborWorks® America. There is no need to pay a private company for these services.

HUD Certified HCA will provide you with free foreclosure prevention services. If you are eligible for the loan modification or refinance program, the counselor will work with you to compile an intake package for your servicer.

 

NOT CREDIT REPAIR!

Using a certified credit counselor at a non-profit agency IS DIFFERENT THAN USING CREDIT REPAIR! Certified credit counselors  that work with non-profit HUD counseling agencies assist your client directly to improve their credit. Credit counselors can communicate directly with the three credit bureaus, Experian, Equifax and Trans Union and also with credit reporting agencies. Credit repair companies do not work directly with the credit bureaus or credit reporting agencies.

 

Certified credit counselors that work at HUD Housing Counseling Agencies can use credit tools available through credit reporting agencies. These tools are not available to credit repair companies.

Certified Credit Counselors provide:

 

... and not Credit Repair that provides Debt Settlement.

 
DIFFERENCE BETWEEN DEBT MANAGEMENT & DEBT SETTLEMENT

What is a Debt Management Plan (DMP)?

This is a voluntary agreement between you and your creditors. People who sign up for a DMP, make one lump payment each month to the nonprofit agency who then sends those funds directly to your creditors.

What is Debt Settlement?

There are two types of debt settlement: professional debt settlement and do-it-yourself (DIY) debt settlement:

  1. DIY settlement does not involve a third-party firm representing you. It could involve a third-party representing the creditor. This “do it yourself” version is considered to be a less expensive form of debt settlement. It occurs when you negotiate directly with a creditor and they agree to consider your account paid for less than you owe. Creditor willingness to accept DIY settlement prior to charge-off is limited. DIY settlement following charge-off could involve a third-party representing the creditor, like a law firm, collection agency, or debt buyer. DIY settlement, while cheaper to the consumer, comes with all of the credit score damage of professional debt settlement. 

  2. Professional debt settlement is generally considered to be a risky and ill-advised debt repayment scheme. In the scheme, you avoid paying your debts. Instead, you send payments to a debt settlement firm. The firm then attempts to negotiate settlements with your creditors. The goal is to receive a “principal reduction,” which occurs when a creditor considers your debt satisfied even if you pay less than the full amount due.

 
BUILD CREDIT

Sometimes clients don't have enough credit scores or history to allow them to apply for the best mortgage. This occurs often with millennial's  who are just starting to build a credit profile. The Wayfinder tool can show if new credit can help the consumers credit scores, how much would be needed and the timeframe to build credit.

REFINANCE STUDENT LOANS

Another area of priority help is assisting clients with a refinance of student loans. Refinancing can be done to bring student loan payments in line with the current income level of the client. Additionally, clients can be helped with debt management for defaulted student loans. 

CORRECT CREDIT, IMPROVE SCORES

Whether you need help to correct a credit error or need to increase scores for the best interest rate and loan program, a certified credit counselor can help you. Why a credit counselor? They will provide focused help on getting your issues resolved.

 

Though loan originators can also utilize credit tools if their credit reporting agency provides them, this is not a primary job for most loan originators. Focused help to remedy your client's credit issue is the primary job for a credit counselor. Our experience with clients working with credit counselors is that the client is "mortgage ready" much faster than they would be with a loan originator.

 

And frankly, not all loan originators are aware of or know how to use credit tools that can help clients. Most use a credit reporting agency designated by their mortgage company or bank. Check with your credit reporting agency for tools that can be used and the addition of needed credit tools.

CONTACT HUD CREDIT COUNSELOR

For Florida Pilot Program:

 

Additional resource within and outside of Florida:

 

National agency:

 

DETAILS ABOUT CREDIT TOOLS

Certified Credit Counselors know how to use specific credit tools that allow errors on credit to be focused on. However, not all credit reporting agencies provide all of these tools.

 

  • The Meridian Link platform allows the view for each credit item to be seen separately with Experian, Equifax and Trans Union on a full credit report. This results in focusing on the credit bureau that has erroneous information and can provide targeted Rapid Rescoring.

 

  • Wayfinder can look at a whole credit report and tell where score improvement can be obtained with direction to improve.

 

  • The What If Simulator provides a bar for each credit item that can show at which $ amount balance an account provides the best credit score.

 

  • When a client has a past bankruptcy with a property that was included, the ADV 120 report that can find the date when the property was finally foreclosed on. When a property mortgage is included in a bankruptcy, (unless reaffirmed), the mortgage payment history does not show up after the bankruptcy discharge date. Because this report is more cost and commonly pulled when a loan is in underwriting, clients and loan originators often don't know this date until too late and can result in the denial of a new mortgage if the wait timeframe after a bankruptcy is not met. 

  • If your client is telling you that they have known credit issues, you may want to use a soft pull credit report that does not affect their credit scores and is less expensive than a hard pull credit report.

  • A hard pull credit report must be used when  submitting a file for both Fannie Mae and Freddie Mac automated underwriting.

 

Check with your credit reporting agency and certified credit counselor on availability of using credit tools noted above.

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2020 Clients2Homeowners.com created Feb. 2020 

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