What's The Difference? Credit Counseling vs. Credit Repair

If you’re in the real estate industry, it can be difficult to determine which type of credit services are needed for your clients. We’ve put together some information to help you direct your client on how to build healthy credit.

Credit Counseling

• Credit counseling, or debt management, is designed to help clients settle out their active credit card or non-secured installment debt for less than what they owe. This option is popular among many pre-bankruptcy consumers, and can help save thousands of dollars. Unfortunately, it leaves a blazing trail of derogatory information on your client’s credit report that could take years to recover from. Credit counseling does not improve the overall credit health of a consumer looking to credit qualify for a home.

• When to refer to credit counseling?

  • If your client is looking for an alternative to bankruptcy but can’t afford to pay back their debts.

Credit Repair

• Credit repair (credit restoration, credit help, credit consulting, or whatever else you want to call it) provides a few key services that are designed to protect and uphold your clients rights.

  • Disputing: Disputing (often called auditing or investigations) is designed to remove or update any account information that is reporting in violation of the Fair Credit Reporting Act. This service is not a magic wand but can have a big impact on your client’s ability to credit qualify.

  • Credit Coaching: Most consumers don’t know the rules to the credit game. Having a game plan on building and maintaining healthy credit is a big part of credit qualifying, and most credit repair companies offer some sort of credit coaching.

  • Creditor Interventions: There are not many credit repair companies that provide services that deal directly with a creditor on a valid derogatory debt. Fortunately, we are one of those companies offering direct creditor negotiations, debt validations, goodwill requests, and more.

• What to look for in credit repair:

  • Are they licensed to provide credit repair services as a Credit Service Organization?

  • Do they offer services outside of disputing?

  • How do they charge for services? Credit Service Organizations are governed by the Credit Repair Organizations Act, and usually won’t charge large lump sums upfront.

• When to send to credit repair?

  • If your client has a collection

  • If your client cannot credit qualify for their mortgage.

  • If your client wants a better interest rate on their mortgage.

  • If your client is trying to maximize their purchasing power.

  • If your client has gone through a life event (divorce, job loss, etc) that has impacted their credit score.

We hope this helps differentiate between credit counseling and credit repair. Both services have a specific target audience, but only one will help improve the overall health of a consumer’s credit profile.