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Don't Let A Credit Score Define Who You Are!

Guest post by: Charles Machado

Article Overview: You're much more than a number, I'm sure, but today more than ever people are caught up in credit scores and what they mean. My job is to help people with credit reports and to help them raise credit scores, but lately I'm doing the Dear Abby thing on my office sofa. Here's a reminder of who you are and that a credit score doesn't define you!

Don't Let A Credit Score Define Who You Are!

Raise Credit Score

Today's 550 credit score may very well have been yesterday's 780 credit report.

When I look at a credit report, it amazes me that I am struggling to qualify borrowers that were once high income earners. Most once had six figure incomes with a credit report well above 700. These factors put these borrowers into A paper categories.

Take Robert, a real estate investor who has borrowed millions of dollars over the years. With a credit report near 800 and a solid record for paying his bills on time, lenders lined up for borrowers like Robert. I personally have been involved with him for over ten years.

What happened? Like many others, Robert fell victim to the economic times. No, he didn't overspend and when he called me last week, I knew he'd never taken equity out of his properties. Robert was conservative. He kept his rents under market in order to keep tenants long term. He negotiated hard with me for long term fixed rates on his mortgages and when he was faced with an ARM, quite common for commercial properties, he worried for days before committing.

What do you do when your largest tenant files bankruptcy?

When they can't pay but continue to occupy the buildings for months as the courts sift through mounds of paperwork? This is what happened to Robert.

Without income he continued to debt service his properties until his savings ran very low. With the promise of a solution just around the corner, he finally tapped his credit lines. Credit cards with high interest rates, but huge limits. After all, Robert needed $25,000 per month just to pay the mortgage.

When he came into my office, I noticed he'd lost weight. The kids were still in college, he told me, but they had to get loans in order to finish. His wife went back to work and they moved from a custom home on the hill to a tract home in town.

He was still playing golf and smiled easily when he spoke of his sleepless nights and I could almost see a tear form when he talked about the kids.

"I should have stopped paying before I tapped my savings, but I just felt I had to make the payments." he said.

Robert, like many of us, wanted to do the right thing. And that meant to pay--regardless of personal misfortune. Robert tried to satisfy his other debts too, but he was building an avalanche of debt by trying to do the right thing.

Finally, he couldn't sustain the financial onslaught any longer and after conceding, he had to let his properties go. One by one, he lost them as tenants tossed in the towel along with their keys. Six major companies, whom I won't mention by name, took down one family.

I like Robert--always have and to me, he's still the same man I met ten years ago. He's honest and a good dad. Although we don't travel in the same circles, I imagine he'd be an excellent friend. I know his wife loves him and it got me thinking about people and their credit and the debt they accumulate.

Do individuals like Robert pay their bills just for the sake of a credit score or because of some deep seated honor? Then again, how much is a credit score really worth? Why didn't he quit paying earlier. Maybe he could have saved himself a lot of misery.

I deal all the time with people who place their entire identity on their credit score. High income individuals tell me they are honorable. That they pay on time and have little debt. Others, with lower scores tell me their story and other than the circumstances they encounter, I believe either could be construed as honorable. A lender might be influenced to lend to an individual with a high score, but I'd lend Robert money whatever his score is.

If you have lost everything, Like Robert, remember what you do have and try not to place too much emphasis on your credit score as it qualifies you as a person. Sure, you can clean your credit. Raise your credit score, but try to remember that a number doesn't define you.

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Article Tags: 0p, borrowers, credit report, credit score, economic times, income earners, lenders, mortgages, paper categories, real estate investor, rents, six figure incomes



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