Did you know only 33% of Americans looked at their credit report over the past year?
That’s not nearly enough. As a consumer debt attorney, you need to ensure your clients understand that their credit report shows their personal payment history and enables lenders to determine their creditworthiness.
It can also help them to uncover possible consumer fraud or identity theft situations — problems that you can then assist them with.
So it goes without saying that you need to explain the importance of your clients not only staying on top of their credit reports but also knowing what to focus on when doing so.
Even if they do make a point of checking out their credit scores, do your clients know what factors go into determining the scores?
Here’s a look at 5 things that directly impact the credit score.
1. Check Credit Report for Payment History
Your clients will want to pay close attention to the payment history section. Whether or not they have a track record for making payments on time will be reflected on their scores. They need to avoid missed or late payments.
What can they do if their history of making payments on time is spotty at best? You can explain the need to clear up any arrears and then to establish a history for making payments on time.
One reason it’s critical for clients to regularly check out their credit scores is to ensure that there are no errors or omissions. In such cases, you’ll want to launch a credit report dispute to get their reports corrected.
Securing an expert witness for your consumer debt case can be beneficial.
2. Credit History Duration
As a consumer debt attorney, you’ll want to ensure your clients understand that the duration of credit histories also factor into their credit scores. Lenders want to see how credit-worthy people are over an extended period.
It’s one thing to look at a track record of one or two years — but it’s another thing entirely to look at a track record over a period of many years. Lenders will be better able to ascertain how well your clients manage their credits.
Clients can get credit score reports from any of the top three credit bureaus in the U.S. So whether they get an Experian report, a Transunion report, or an Equifax report, they will want to look at their credit history.
When looking at their credit reports, your clients should also be mindful of their FICO Scores.
It’s a number corresponding to the data found in their credit reports. Lenders use this number to see the amount of credit people have, how long they’ve had it, and how faithfully they make payments.
3. Utilization of Credit
Another important factor impacting credit scores is the amount of credit people actually use versus the amount of credit that is available to them. A lower credit utilization amount will lead to a higher credit score.
This is one reason why you should inform your clients that they should avoid, to the best of their ability, using up all of their available credit.
It’s best for them to borrow only as much as you can comfortably afford to pay back on time. This will help them to get a good credit score.
4. Credit Review Inquiries and New Credit
Credit review inquires and new credit will also impact your clients’ credit scores. If there is an excessive number of inquires to comb over their credit, their credit scores could be adversely impacted.
Companies typically perform credit checks to figure out creditworthiness. Whether your clients want a loan to buy a new car or they want to apply for a credit card, the lender may choose to conduct credit checks.
A hard credit check is usually done by a credit card issuer or a bank as part of a process to help it determine if it will lend money. So a hard check may be conducted if your clients want credit cards, personal loans, or mortgages.
Soft credit checks are usually done when a company wishes to assess your clients’ credit as part of a background checks process.
While hard credit checks are typically done only with the permission of your clients, soft checks are often done without any prior consent. For instance, a business might perform a soft credit check prior to offering a job.
Hard credit checks have the potential to impact your clients’ credit scores more than soft credit checks will. Soft credit inquiries might be launched if your clients want student loans, mortgages, or credit cards.
5. Diversification of Credit
Another important contributor to your clients’ credit scores is their credit diversification. The greater their credit diversification, the better their credit score will be. It will show they can properly handle various credit types.
Do You Need to Speak to a Credit Expert?
It’s important that your clients understand the importance of checking their credit score reports. As well, it’s critical that they understand what factors contribute to determining their credit scores.
As a consumer debt attorney, you’ll undoubtedly take on cases where your clients’ credit scores will take on a great deal of importance and relevance. That’s where we come in. We specialize in serving as expert witnesses.
We’re imminently experienced at helping with credit-related cases. So if you’re a consumer debt attorney who needs an experienced credit export who can testify on your clients’ behalf, get in touch to see how we can help.