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Leveraging credit scores: credit scores are complex tools that help determine prospects for loan approval. Understanding them--and more important, how they can be raised--can help consumers get the loan they want. It can also keep production up in leaner times.

Article Excerpt
Not too long ago, your phone was probably ringing off the hook. You could afford to wait for the loans to come flooding in to you. But now, with volume declining across the country, that luxury is behind us. Mortgage professionals will need to work harder, plan more carefully and find new techniques for attracting and holding on to business. [??] One approach that works well for many mortgage lenders and brokers is to offer knowledgeable credit education and counseling to borrowers. Because credit scoring is a mystery to most consumers, explaining how it works is a strategy that stands to open up a virtual mountain of possibility for the future. [??] Consider the following situation: A potential borrower calls loan officer No. 1 to find out if he can get a loan and afford the payments for a home he wants to purchase. The loan officer takes the basic information--income, credit-card debt, other loans, etc.--then runs the numbers, notifies the potential borrower that he doesn't currently qualify for any mortgage program that will allow him to purchase that particular house, and sends him on his way. [??] Now, imagine that same person calls loan officer No. 2, who takes the time to pull the borrower's credit report and counsel him on methods to improve his credit score. This might involve suggesting, for instance, that he pay down some credit-card balances and dispute several inaccuracies on the credit report. Within a few months, by implementing these recommendations, the potential borrower raises his score and qualifies for a mortgage that will get him the home he wants--and lender No. 2 secures the business.

Most mortgage professionals know that many factors are involved in a credit score, and for homebuyers, much depends on that three-digit number. Unfortunately, most consumers do not have even basic knowledge of how credit-scoring works.

This article scopes out information originators can use to educate potential borrowers on credit reports, and outlines steps that can increase scores and help borrowers qualify for a loan.

Providing a clear view

To give the best advice to a borrower, the first step is to ensure you are working with a current credit report. By that I mean one compiled 90 days or less from the date of your client meeting. Then explain the score, how various items in the report affect it and what that all means to the potential borrower.

The impact of any individual item varies based on the other items present in the credit report, including the following:

* Payment history. A consumer's payment history is the heaviest determinant on the score. Severe delinquencies, late payments, current past-due items, liens and collection activity have a negative effect, while consistently paying bills on time and paying...

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