Do you speak the language of Credit Repair?
All financial services have their own unique terminology.
But believe it or not, that terminology can sometimes confuse and intimidate people and prevent them from seeking financial services.
So on this week’s Podcast, I list the Top Ten terms everyone needs to know!
Confusion and intimidation affect consumers' financial decisions.
A study by the Milken Institute determined that 43% of adults in the United States are considered financially illiterate. That’s a huge percentage of the population! And a survey by OnePoll found that 41% of Americans are intimidated by their own finances.
And who can blame them?!
We’re not taught personal finance in school, and financial fine print often reads like it was designed to be confusing.
But how does this relate to us?
Credit Repair, even though it’s been around for a few decades, it is still a relatively new industry, so the problem of customers not knowing what we do or what our words mean has an even greater impact than other financial services.
These Top Ten common words and phrases can provide you or your customers with the vocabulary needed to understand the basics of Credit Repair and allow both sides to communicate important information.
If you’re looking to repair your credit, these terms will help you understand how our industry works.
And If you have a Credit Repair Business, you can use this as inspiration to make your own educational materials.
Here’s what’s important…
We’re not going to be discussing advanced terminology. There won’t be talk of Arrears, Cramdowns, Piggybacking, or Rebucketing - even I sometimes forget what Rebucketing means.
This is all about learning the introductory language of Credit Repair.
And that’s probably the best place to start…
CREDIT REPAIR is the process of identifying and deleting inaccurate, incomplete, and outdated information from credit reports.
Some businesses might call it Credit Mending, Credit Restoration, or Credit Rehabilitation, but it all means the same thing.
Now, let’s get into the Top Ten Credit Repair Terms that everyone needs to know…
CREDIT – Credit is deferred payment when making a purchase, based on a borrower promising to pay the full amount plus interest at a later date.
CREDITOR – A creditor, also known as a lender, is an individual or entity to whom the borrower owes money.
CREDIT HISTORY – Credit history is a record of a borrower's ability to repay debts and demonstrate responsibility in repaying them. Credit histories are recorded in credit reports.
You can guess what’s up next.
CREDIT REPORT – A credit report is a detailed summary of a borrower’s credit history. Credit reporting agencies keep these reports on file and submit them to potential creditors on request, who use them to determine whether or not a borrower is creditworthy.
Credit reports include the number and types of credit accounts a borrower has used, how long each account has been open, the amounts owed, the amount of available credit used, whether bills are paid on time or not, and the number of recent credit inquiries.
CREDIT INQUIRY – An inquiry is a request for a copy of a borrower’s credit report to evaluate their creditworthiness. Inquiries take place during the submission of every credit application to determine whether a borrower should be extended credit.
There are HARD inquires and SOFT inquiries. A HARD Inquiry is an inquiry where a creditor requests a copy of a borrower's credit report after they applied for credit or a loan. Hard inquiries are designed to evaluate a borrower’s risk level, and they do affect your score, especially if you have a lot of them.
A SOFT inquiry is an inquiry where a lender requests a copy of the borrower's credit report, but it has no effect on the borrower's credit rating.
Also, if you’re pulling your own credit, like with a credit monitoring service like Credit Hero Score, that does NOT affect your score at all.
CREDIT SCORE – A credit score is a statistic-based number that speaks to the borrower’s credit report and overall credit history. Credit scores convey how likely borrowers are to repay future debts. The credit scoring system helps determine whether a potential borrower should be extended credit. The most common credit scoring systems are FICO and Vantage, and the scores range from 300 to 850. A high score means the borrower has good credit, and a low score means the borrower has bad credit.
Borrowers with bad credit tend to struggle to get approved for credit from traditional lenders, and if they do get approved, the down payments and interest rates tend to be very high. Bad credit can be the result of late payments, skipped payments, evictions or bankruptcies, or even identity theft. And they’re often the result of an error made by one of the Credit Bureaus because nearly 8 out of 10 credit reports contain errors. That’s why it’s important to check your credit reports often.
CREDIT BUREAUS – Credit bureaus, also known as credit reporting agencies, are entities that keep borrowers’ credit reports on file and provide copies to card issuers, lenders, and hiring managers based on requests.
The Fair Credit Reporting Act (FCRA) has a strict limit on who can check your credit and under what circumstances. The law ensures that only business entities with a specific, legitimate purpose, not members of the general public, can check your credit without written permission.
The three main credit bureaus in the US are Equifax, Experian, and TransUnion.
FURNISHER – A furnisher, also known as a data furnisher, is an entity that reports information about borrowers to consumer reporting agencies, which may include credit bureaus, tenant screening companies, check verification services, and medical information services. Furnishers are typically creditors, lenders, and collection agencies but may include other entities.
When engaged in Credit Repair, individuals or Credit Repair organizations dispute information provided by the Bureaus or the Furnishers.
DISPUTE – A dispute is a legal process for a person to question the validity of any information that appears on their credit reports. We’re given this right by law under the Fair Credit Reporting Act.
The dispute process is all done by mail, and the borrower must identify specific inaccurate, incomplete, or outdated information and demand that it be deleted from their credit reports. These letters are called Dispute Letters.
Also, I might add that the reason we do this by paper mail is because if you dispute online with the bureaus, you actually wave away your rights. So ALWAYS dispute by mail, and you’ll have much better results.
The act of sending in a dispute on your credit report does not hurt your score. The outcome of the dispute often causes your score to adjust, higher in most cases but sometimes lower depending on the circumstances, especially if you’re disputing and removing an old established account.
The CFPB – The Consumer Financial Protection Bureau is the US government agency responsible for consumer protection in the financial sector. They make the rules. When disputing with the Bureaus or Furnishers, filing complaints with the CFPB is a common and effective Credit Repair tactic.
For a quick recap…
A borrower asks for CREDIT.
A CREDITOR provides it.
What the borrower does with that credit becomes their CREDIT HISTORY.
A detailed summary of that history is a CREDIT REPORT.
An INQUIRY is when any entity asks to see that report.
A CREDIT SCORE is a grade given to that report with the intention of showing how likely it is that the borrower will repay future debts.
The CREDIT BUREAUS determine those scores based on information provided to them by the FURNISHERS.
When the bureaus or the furnishers use inaccurate, incomplete, or outdated information, a borrower files a DISPUTE.
And the CFPB makes sure everyone plays by the rules.
Those are the Top Ten Credit Repair terms that everyone needs to know!
Again if you’re looking to repair your own credit, I hope you have a better understanding of how this process works.
And if you have a Credit Repair Business, feel free to use this video as inspiration to make your own educational materials.
When more people know these terms, that will mean less confusion and fewer people intimidated by the Credit Repair process.
I’ll end by saying…
If you don’t already have a Credit Repair Cloud account, check it out. It’s the software that most Credit Repair businesses in America run on. Just sign up for a 30-Day Free Trial at CreditRepairCloud.com/freetrial
And If you’d like me to hold you by the hand as you launch your own credit repair business, check out our Credit Hero Challenge!
It’s an amazing program where you’ll learn the processes that have made millionaires, and it costs less than you'll spend taking your family to McDonald’s for dinner.
We’ve got another challenge starting in a few days, so grab your spot right now at CreditHeroChallenge.com!
Until then, remember, keep the facts on your side…
And keep changing lives!