7 Steps Your Clients Can Take to Build Credit Fast

by on Feb 26, 2021, 11:38 AM

7 Steps Your Clients Can Take to Build Credit Fast

If you’re a lender with a prospective client who doesn’t have their credit score quite where it needs to be for a loan, you don’t have to send them out the door just yet. By providing these people with solutions for building their credit fast, you’ll not only be helping them but helping yourself in the process.

1. Reflect on Current Credit Report 

The first step in helping your clients to build their credit is to take a look at their own credit report/score. On their credit report, they can look out for a few factors to see where they stand:

With this information, you can start your client on the right path towards building their credit fast. And, you can also do this before running a formal hard-inquiry on their credit report so that they don’t have another hit on their credit before having the opportunity to start building it. 

2. Assess Credit Usage

In general, the best way to start building credit fast is to utilize the credit you have available to you, while keeping your debt-to-income ratio under 43% for a home. But, credit is also important when buying a car. 

To start, you could recommend that your clients do something as simple as taking out a low-interest credit card (even better if it’s 0% APR with a promotional offer!), and use it to buy very small purchases and pay those purchases off immediately. Of course, ensure that your client will be responsible with their usage, and that if they currently have credit card debt, they should begin paying that off. 

3. Recommend a Plan to Pay Off Debts

Another good way to help your client start building credit fast is by advising them on how they can tackle any debts they have. ScoreMaster offers payment plans based on the fastest ways to impact their credit score or the amount they want to pay. Paying off debt not only improves your clients’ credit score, making them a candidate for better interest rates, but it also helps ensure you as the lender can be confident in their ability to pay their mortgage or car payment. Additionally, when your client begins tackling debt, they’ll be able to afford a bit of a higher payment, save more that they can put towards their downpayment, and have a cushion to help with move-in expenses.

4. Create a Budget and Timeline

The first step in paying off debts is to create a reasonable budget within a reasonable timeline. While it’s not your duty as the lender to do this for your client, you can give them some tips. For example, ask them to construct a list of their debts and a timeline they can realistically pay some of that debt off by.

5. Tackle Debts With Higher Interest Rates First

There are many “financial freedom” strategies that experts advise, and some of these may come in handy when it comes to helping your clients find the fastest way to build credit. For instance, you can recommend that they pay off debts with higher interest rates before other debts.

6. Find Money-Saving Solutions

When it comes to helping your clients access the fastest way to build credit, suggesting some money-saving solutions and strategies can speed things up. After all, the quicker they can improve their credit, the quicker you can start earning money from the loan you’ll be lending.

Consolidating Student Loans

One of the biggest setbacks to home or car ownership is the burdens of student loans. A good money-saving solution could be to consolidate student loan debt in order to get a lower interest rate. You could also advise your clients to see if they can alter their repayment plan and/or check to see if they are eligible for student loan forgiveness. Or, refinance – rates are low, after all.

Do a 0% Interest Balance Transfer

For clients who want to begin building their credit faster but have credit card debt, a solution could be to do a balance transfer to another credit card that has 0% interest. This way, you can not only consolidate your debts, but you can stop paying interest and pay down the principal. 

Take Advantage of First-Time Homebuyer Programs

Another obstacle to homeownership is the challenge prospective homebuyers experience when it comes to saving up the down-payment. And, while directing your client to first-time homebuyer programs won’t necessarily help their credit and other credentials, it can help offset some of these challenges overall. 

References:

https://www.myfico.com/credit-education/credit-reports/credit-checks-and-inquiries

https://www.discover.com/credit-cards/resources/balance-transfer/

https://www.fha.com/first-time-home-buyers