This Credit Repair Trap Cost Consumers Nearly $200 Million
When credit is standing between you and a mortgage, the promise of a quick fix can be appealing.
In this Real Estate Tip Tuesday episode, Katie Halle Lambert, Associate Broker with Team EvoAZ at eXp Realty, and Ryan Gilliam with Your Best Mortgage discuss credit repair, warning signs to watch for, and what future home buyers can do when their credit needs some work.
The conversation was prompted by an FTC case involving a large credit repair operation and allegations of false promises, illegal upfront fees, and nearly $200 million taken from consumers.
Rather than focusing on the details of that case, Katie and Ryan use it as a reminder for home buyers to be careful about who they trust with their credit.
Start With the Credit Report Used for the Mortgage
One of Ryan’s first recommendations is not to assume you cannot qualify for a mortgage based solely on a score you see through a consumer credit app.
When someone is preparing to buy a home, Ryan prefers to review the credit report being used for the mortgage process and determine what is actually affecting the borrower’s credit profile.
That may include:
High credit card balances
Recent late payments
Collections
Limited credit history
Information that may be reporting incorrectly
From there, the goal is to create a focused plan based on the individual borrower’s situation.
In some cases, Ryan says buyers may be closer to qualifying than they think.
Do Not Make Random Credit Changes Before Reviewing the Bigger Picture
It can seem logical to immediately pay off accounts, close credit cards, or start making other changes as soon as you decide to improve your credit.
Ryan cautions buyers against making those decisions randomly before reviewing their credit situation.
What seems like the obvious move may not necessarily be the step that best supports the borrower’s mortgage qualification or overall credit profile.
A more useful approach is to first identify which accounts or issues are having the greatest impact and then focus attention there.
Credit Repair Red Flags Home Buyers Should Watch For
Credit repair companies can sound especially attractive when homeownership is the goal, but Ryan says there are several warning signs consumers should take seriously.
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Be cautious when a company guarantees that it can raise your credit score by a specific amount.
Every credit situation is different, and Ryan warns against promises that make the process sound automatic or guaranteed.
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Another major red flag is a company claiming it can simply remove legitimate negative information from a credit report.
If a late payment, collection, or other negative item is accurate, paying a company does not automatically make that information disappear.
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Ryan also recommends being cautious when a credit repair company requests significant money upfront.
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Legitimate errors can be disputed, but Ryan warns against companies that tell consumers to dispute every negative item whether the information is accurate or not.
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A company telling you not to communicate directly with the credit bureaus should also raise concerns.
Creating a New Identity or Filing a False Identity Theft Claim
Ryan describes suggestions to create a new identity or file an identity theft claim for debt that actually belongs to you as a major red flag.
While legitimate companies may be able to help consumers organize their information or dispute actual errors, Ryan emphasizes that there is no secret loophole that instantly creates good credit.
If something sounds too good to be true, it probably deserves a much closer look.
What Can Home Buyers Work On Instead?
When someone wants to purchase a home and their credit needs improvement, Ryan’s approach starts with reviewing the report and identifying the accounts having the biggest impact.
One common area is credit card utilization, which means looking at credit card balances relative to available limits.
Other areas may include:
Making payments on time
Correcting legitimate reporting errors
Addressing collections appropriately
Dealing with past-due accounts
Ryan explains that his team can pull a buyer’s credit report, provide a copy, review it with the buyer, and put together a focused game plan.
Rather than overwhelming someone with a long list of tasks, the goal is often to identify three or four areas that may provide the most meaningful place to focus.
From there, they can review the situation again and see how things have changed.
Ryan says these plans may sometimes cover roughly two to six months, depending on the buyer’s circumstances.
Credit Report Errors Can Happen
Not everything appearing on a credit report is necessarily expected.
Ryan shared examples of situations where an account may still be connected to a former spouse or where an unfamiliar credit item appears because of a relative with a similar name.
In one example, a divorced borrower still had a shared credit card appearing on their credit. The former spouse later began making late payments, which created an issue the borrower needed to address.
Other situations may involve a collection or charge-off that does not actually belong to the person whose report it appears on.
That is why Ryan recommends reviewing the report carefully, line by line, and asking:
Is this account mine?
Is this information correct?
Is something reporting that should not be there?
When information is genuinely incorrect, it may be appropriate to dispute it.
Credit Repair Is Not Always the First Step
Ryan explains that his team usually does not send buyers directly to a credit repair company.
In many cases, the first step is simply understanding the mortgage credit report, identifying the issues that matter most, and creating a manageable plan.
He says there are situations where a legitimate credit repair company may become helpful, particularly when an account does not belong to the borrower and attempts to correct the issue have not been successful.
For most buyers, however, the goal is to understand the credit profile first before paying someone to fix it.
Buying a Home? Get a Clearer Picture Before Assuming You Cannot Qualify
Credit challenges do not automatically mean homeownership is off the table.
If buying a home is your goal, getting your actual mortgage credit situation reviewed can help you understand where you stand and which steps may make the most sense for you.
The important part is avoiding quick-fix promises and making decisions based on your specific credit profile rather than assumptions.
Prefer to Watch Instead?
Want to hear Katie and Ryan explain the credit repair warning signs and what future home buyers can do when credit is standing between them and a mortgage? Visit the Team EvoAZ YouTube channel and look for the Real Estate Tip Tuesday playlist.
Have Questions About Buying or Selling a Home?
Team EvoAZ can help you navigate the real estate side of your purchase and understand the documents and deadlines that come with an Arizona home transaction.
Katie Halle Lambert | Team EvoAZ
Text ConnectWithKatie to 480-508-9828
Have Questions About Your Mortgage?
Whether you're purchasing your first home, refinancing, or simply have questions about your financing options, Ryan is here to help.
Ryan Gilliam | Your Best Mortgage
Text ConnectWithRyan to 480-508-9828
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Looking for homes in the Phoenix area? Text GetPhoenixDeals to 480-508-9828 to browse current listings and great opportunities.
〰️ Looking for homes in the Phoenix area? Text GetPhoenixDeals to 480-508-9828 to browse current listings and great opportunities.
Disclaimer: This video is prerecorded. The information provided in this video is for educational purposes only and not financial or legal advice. Always consult a licensed lender, real estate agent, or wealth manager for guidance specific to your situation.
