At this time of year I trust most thoughts and mindsets are preoccupied on the “Day of Judgement” we just went through, and the looming “Day of Atonement”, G-d willing, just a few days away. I would like to take this opportunity to wish everyone a Gmar Chasima Tova and best wishes for utilizing these days to their fullest, to merit blessing in the year to come.The Talmud in Rosh Hashanah (16a) says, “Man is judged according to his present actions”, and it is our hope and prayer, that with the proper atonement, we are evaluated ‘as we are now, and not as we once were’.
If only “credit reporting” functioned in the same way. The most detrimental factor that contributes to a poor credit rating is derogatory accounts such as collections, charge-offs, judgments, and the like, that might have happened months or even years ago. Most credit scores do not judge someone “in the present” and it is with much agony that people learn often too late in time, about issues that might plague their credit profile, or ways to improve them.
Most people do not know the myriad of items that are reflected on their personal credit score. In fact, the FTC says that 1 in every 5 Americans has errors on their credit report that have a negative impact on their score. When warranted, disputing errors on your credit report can be a way to give your score a boost – but more often than not that quick-fix might prove to be more harmful than helpful when the blemishes are justified. This might also cause closing delays if you are in the midst of applying for a mortgage. Similarly, delinquent items – including taxes, judgments, charge offs, tax liens, etc have the potential to affect the lender’s lien position, or diminish the borrower’s equity – and therefore will be required to be paid off at or prior to closing.
Very often people are too quick to make the payments on some of these ‘stale’ accounts, when in fact the guidance from a competent financial or credit professional would be something altogether different. For example, in many cases, if the balance of an individual account is less than $250 or the total balance of all accounts is $1,000 or less might not have to be paid off prior to closing, provided your lender can document a strong credit profile, and meaningful financial reserves. Similarly, when it comes to open or outstanding judgements, people are quick to pay these in full and wait for the credit report to reflect the favorable update. They are shocked to learn that the opposite might in fact happen. A dormant, or old judgement or collection might already have had its negative impact, and by “updating” the account, it might bring a short-term credit score decrease.
There are solutions that could be suggested that could “vacate” a judgement, or receive a “satisfaction” post-closing that will not bring the negative short term impact with it. Having your judgment set aside or vacated is the only way to possibly have it removed from your credit reports sooner than the “seven years from date filed” date. And while a satisfied judgment is better than an unsatisfied judgment, it’s not going to be removed from your credit reports any sooner than if it were unpaid.
The bottom line is, improving your credit score doesn’t have to take years. These are just a few of many strategies that I continually use help my clients manage and improve their credit for more favorable loan terms. Furthermore, there are recommended and trusted non-subscription based services that allow consumers to review and analyze their credit tradelines on an annual basis. This analysis is vital to maintaining the proper controls on your credit profile and making the real-time corrections before it’s too late.
On a personal note, these Days of Awe are a magnificent opportunity for us to review the past year, our deeds, misdeeds, and missed opportunities. We should use these days to update ourselves on the spiritual “accounts” that are most important to us ensuring that our judgement this year will be based on “real time” information. Gmar Chasima Tova. A special shout out to Rabbi Neuburger for everything.
Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Approved Funding is a mortgage company offering competitive interest rates as well specialty niche programs on all types of Residential and Commercial properties. Shmuel has over 20 years of industry experience including licenses and certifications as certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. He can be reached via email at [email protected]
