How to Help Clients with Credit Problems
A still-faltering economic recovery has wreaked financial havoc on many of your clients. Foreclosure, underwater mortgages in default and job loss can damage even a pristine credit record. And while as an accountant you're not necessarily in the credit repair business, some work in this area can add value to your services, says Marc Rosen, CPA.
"I can be a mediator and sometimes negotiator," says Rosen, a partner at Cameo Wealth and Creative Management in New York. "If it's a small balance, a one-off charge, a $10 co-pay someone forgot to pay and it's gone to a collection agency, I'd be comfortable calling the company to negotiate."
For clients with large credit card balances or judgments against them, it's time to bring in the credit repair experts, he says.
But even if accountants shy away from any credit repair, they can do one key thing: Ask clients if they know their FICO scores and have seen their credit report, says credit coach Jeanne Kelly, founder of Kelly Group Consulting in New York, who did a webinar two years ago for the American Woman's Society of Certified Public Accountants.
"A lot of times people come to me because they don't know where to start," she says. So the credit score and report are the first steps in knowing what's been reported about them, and if it's accurate.
Clients can do a great deal to repair their own credit woes but they must be persistent, do their homework and know their legal rights, Kelly says.
For do-it-yourself credit repair, the Federal Trade Commission's (FTC) offers a booklet with a variety of tips—from dealing with credit reporting agencies to finding credit counselors and even filing for bankruptcy, which still requires credit counseling beforehand. It also explains how to get your credit score. (Hint: don't bother with TV commercial promises.)
If clients don't want to tackle the repair process on their own, the National Foundation for Credit Counseling (NFCC) offers tips for finding, evaluating and hiring a counselor.
Here are two key issues that the FTC says people need to know about credit repair services:
First, watch out for scams, advises the FTC. Your clients will be anxious, frustrated, and maybe desperate. Scammers prey on that. Claims that a company will remove bankruptcies, judgments, liens and bad loans from a credit file forever, guarantee that bad credit can be erased, a new credit identity can be legally created or that someone can provide false information on credit applications are all scams, the FTC warns.
In fact, the FTC says its attorneys have never seen a legitimate credit repair company make those claims.
Second, the FTC enforces the Credit Repair Organization Act. This law makes it illegal for credit repair companies to lie about what they can do. Companies must explain guarantees, costs, legal rights (in a written contract), a three-day no-charge right to cancel and how long it'll take to get results.
Ultimately, regardless of what they choose, your clients must realize that credit repair takes time and a debt repayment plan.