Most mortgage clients understand that their credit report influences their loan and its terms. For many, then, credit review and improvement can mean the world — not to mention a favorable mortgage.

For brokers, credit proofreading — or credit review and rescoring — can be an effective referral-generating opportunity. This service helps you identify errors in your clients’ credit reports, as well as ways they can correct the errors.

In fact, many FICO scores could be wrong. A 2004 U.S. Public Interest Research Group report found that 25 percent of credit reports contain “errors serious enough to deny consumers access to credit.” This could mean that one of in four
applicants may be turned down because their credit score was wrongly and unnecessarily lowered in error.

Another type of error that can deflate FICO scores and that often is more damaging involves credit-use. These errors  often appear in different forms, which makes them hard to detect. Worse, consumers who seemingly make good short-term financial decisions inadvertently commit credit use errors without realizing it.

In fact, many consumers use credit in ways that needlessly lower their scores. Some have too many credit cards. Others don’t have enough. The same goes for credit balances. It all depends on how the credit fits into their profiles and how Fair Isaac and Co. interprets consumers’ new credit.

Mortgage brokers can help their clients identify these errors, however, and work toward reconciling them and increasing their credit scores. To offer a credit-review and rescoring service, you’ll likely want software that detects any hint of data or usage errors within a credit profile. The software scans an applicants’ entire credit profiles each time you order a credit report. Results are then neatly categorized by the type of error, with credit-use errors separated from
data errors.

Once detected, these tools tell you how to fix the errors and how many more points your clients will get by doing so. With the help of a credit-reporting agency, your clients often can see higher credit scores in just three days. When you position your credit review in a way that presents you as a qualifying expert, you’re moving down the referral runway. Taking the next step and demonstrating that you can improve your clients’ credit health can enhance your referrals.

People are concerned with every detail of their financial lives, and with credit proofreading, their credit profile becomes the one financial area in which you can help. And because healthier credit profiles often mean higher credit scores and better mortgage terms, many clients go out of their way to send you their friends and family members.

The problem I have with the article is that the casual reader is left feeling helpless, almost at the mercy of a random credit score attached to hit or miss credit card use. The fact is, many mortgage brokers use advanced credit proofreading software that can identify exactly where you may be going sideways with your credit use.

Don’t feel bad if you don’t know how your use (or non use) of credit cards is helping (or hurting) your credit score. How could you know? And for that matter, those that say they know are only guessing. Credit use is always considered in context of ones complete credit profile. This means that opening up a brand new credit card may help your score – or hurt it. It all depends on how many cards you currently have, how often you use them and to what extent.

The bottom line is that the impact of your present credit use on your credit scoring is complicated. But it doesn’t need to be confusing. I’m suggesting that the best time to select and visit with a mortgage professional is before you are ready to buy or refinance your home. Pick up the phone and talk with a few of them – find out what they know about credit scoring – and ask them about their technical ability to scan your credit files for errors. Can they detect the issues in the way you use credit that are hurting your scores? Can they offer suggestions to improve your credit use in order to strengthen your scores? And can they scan your credit file for data errors that may be unknowingly harming your credit score?

These mortgage professionals exist. I know, because more than 20,000 of them use our software nationwide to perform these services every day. A one hour visit with anyone of them may result not only I a stronger credit profile, but also in the best credit education you’ve ever had.

What is credit proofreading?
Credit proofreading is the automated examination of credit file data, supplied by the three major credit bureaus, to detect whether or not a credit score has been incorrectly evaluated due to errors within the credit file.

What errors does credit proofreading detect?
Two types of errors are spotted: credit data errors and credit usage errors.

Error Type #1:  Credit Data Errors
Creditors report payment history to the credit bureaus using data such as credit limit, credit balance, payment amount, current status and payment history. Computers read this data to calculate a credit score. If anything is entered incorrectly due to human or computer error, inaccurate scores may result.

Error Type #2: Credit Usage Errors
Credit usage reflects the way borrowers use existing credit lines. Since credit use is a factor in calculating credit scores, improper spending habits can lower credit scores. Credit usage is misunderstood because many borrowers have little awareness of how their credit use affects their scores. Credit usage activities that get factored into credit scores include the number of available credit lines, the amount of debt incurred or the balance on each credit line and whether a credit card is used too much or too little.

How can credit proofreading help?
Credit proofreading evaluates the accuracy of credit reports, identifies errors, estimates how many points each error is costing the borrower and lists specific actions that can be taken to correct errors. Results can typically be returned immediately, and most errors can be resolved within 72 hours. For borrowers with credit usage errors, mortgage brokers and loan officers who conduct credit proofreading can offer suggestions on how to alter credit usage habits to legitimately increase the credit score.

How is credit proofreading different from credit repair?
Credit repair companies falsely claim to clean up credit reports, for a substantial fee, so borrowers can get approved for auto loans, mortgages or insurance. These schemes do nothing more than dispute information, which borrowers can do for themselves easily and at no cost. Credit proofreading, on the other hand, evaluates the accuracy of credit reports and assists borrowers in correcting errors or changing spending behavior – at no cost to the borrower. Further credit proofreading analyzes the actual data within the credit file, something a borrower can not do without the help of a mortgage professional.

Where can borrowers receive this service?
More than 4,000 mortgage professionals around the country have automated credit proofreading tools to identify and resolve data and usage errors within credit files.