Real estate agents understand the significance of their client’s credit scores in securing a home mortgage. 

Recent statistics show over 30% of Americans have subprime credit scores.

Many may not get preapproved for a home mortgage because of their credit score or history.    

The above findings bring us to the discussion: “How can real estate agents help their clients increase credit scores?”

Your prospect’s credit score significantly impacts your real estate business. As a real estate agent, you ought to do something to help those potential clients improve their credit scores. 

A better credit score or extended credit history translates to increased property affordability and a higher commission.  

Think about it. When your client does not get pre-approved for a loan amount they seek due to poor credit score, they settle for a lesser amount. Dropping to a lower amount means less commission to you as their agent. 

So, in this post, I will tell you ways you can guide your current clients and prospects to increase their credit scores. 

Check Your Clients Credit Score and History

Checking the client’s credit score is the initial step in helping the client build the score. Checking a client’s credit score helps the realtor better understand the client’s current credit position. 

Modern technology and tools make checking one’s credit score more accessible. 

First, everyone can request their credit report once a year. If a client does have a recent credit report, request to see it at the start of their house-hunting journey. 

Second, you can access credit reports using credit bureau services. Check for credit bureau services that allow real estate professionals to review clients’ credit reports and scores.

Go Over the Credit Report With Your Prospect

Once you have gotten a hold of the credit report, review it together with your prospect. Educate your prospect that they must check the credit report and identify any false entries. 

Also, take time to explain to the prospect the process of removing the false entries from their credit report. 

Some top reasons to check credit scores periodically include:

• Checking credit history and scores helps one understand current credit position better
• Regular credit report checks help one be aware of what lenders may see
• Credit reports help one detect any inaccurate or incomplete information

You must also explain to the prospect the importance of checking credit reports periodically so they can point out things like identity theft and fraud, which impacts their borrowing badly. 

Encourage Your Prospects To Take Care Of Late Debts  

Most Americans have paid a bill late at some point in their life. When applying for a property loan, lenders can take late payments as a sign of financial struggle, hence approving a lower amount or denying access to credit. 

Therefore, late and old debts seriously impact one’s financial status when buying a property.  

Educating your prospects about taking care of old and late debts is another essential aspect of helping them improve their credit score. 

The prospect should not get to the mortgage preapproval stage with anything wrong debts or anything marked as delinquent.

Pay Down Existing Credit Card Balances

The amount of debt your clients carry on their credit cards is one of the most significant factors affecting their credit scores. 

Thus, encourage prospects to refrain from maxing out their credit card since this may affect their score negatively, impacting their mortgage approval applications.

Ideally, there is no magic number regarding how much debt is too much. Thus, the rule of thumb is to never keep the credit utilization level at less than 30% of the total and never to max out the credit limit. 

In addition, to improve the credit score, encourage your prospects to pay off a large chunk of their credit card balance and only utilize it as needed. 

Remember to advise your prospects to keep their credit cards open even if they have consolidated the balances to a low-interest card. 

While credit cards are an excellent financial tool, they can significantly impact one’s credit score. 

Thus, encourage your prospects to be mindful of how they use their credit cards and to avoid too much debt where possible. 

Ask Creditors For “Goodwill Deletion”

Where a prospect has cleared a late or old debt, advise them to seek a goodwill deletion. Also known as a forgiveness removal letter, it is an application sent to a creditor requesting the omission of a bad entry of one’s credit reports.

While a goodwill letter may repair the credit score, the bad entry may or may not remain in history. 

However, encourage the prospects always to pay their debts on time as a goodwill letter may only be acceptable once in five years, depending on creditors’ terms. 

Educate Prospects About Credit Counselling 

Credit counseling advises people on their money and debts. Credit counseling organizations also advise people on budgeting and offer money management education. 

Therefore, attending credit counseling workshops can be an effective way of helping one build a good credit score and history. 

Here is an overview of the advice your clients may receive from attending credit counseling sessions: 

• Advise on how money and debt management
• Budgeting tips to ensure minimal debt and avoid unnecessary spending
• Tips to improve credit score and build their credit report 
• Free credit reports and other educational materials 
• Debt management plan to help them clear debts

Therefore, you may consider partnering with a debt counselor in your area to help you offer advice to your target homebuyers. 

Conclusion

We have examined six ways real estate agents can help their prospects build a positive credit report. 

Remember, you can increase your real estate commissions when your target clients have a positive credit score and a long credit history.  

Besides, by offering these tips to your prospects and current customers, you are building a positive relationship with them, which increases the chances of getting referrals from happy customers. 

Do not restrict your business to listing new properties and organizing open houses. Consider becoming a financial advisor or credit counselor and help more people afford their dream homes.