Wrecked Credit? No Problem!

We’ve all had one at some point: a lemon of a car that turns out to be too good of a deal to be true, that always seems to be in need of a repair and that — we later discover — survived some massive accident in its history that somehow miraculously escaped reporting and isn’t tied to the vehicle identification number. Sure, the damage is no longer visible from the outside as soon as the body shop replaces a panel or two, hammers out the dents and fixes the paint. But the damage never goes away. It will always be a car that’s been through an accident, whether or not its electronic record shows it. Credit scores pose a similar situation. No matter how hard a consumer works to build up his or her FICO after credit card delinquencies, home foreclosure or other financial hardship, one negative mark on  a credit report may mean denial on an application for an auto loan or home mortgage, a line of credit, apartment or even a job. That is, unless, a credit repair company works on the consumer’s wrecked credit history. One such credit repair company, Credit Rewind, this week touted new free online results tracking so customers can watch the “derogatory marks” disappear from their credit reports. Credit Rewind’s process takes two to four months to clean up a credit report, although the $500 service lasts for a full year, according to company statements. Typical issues Credit Rewind sees in troubled credit include charge-offs, foreclosures, bankruptcy, repossession and “slow pays.” The company touts its service as an utterly legal way to erase those marks from credit scores, increasing a consumer’s chance at approval for a mortgage loan. “Credit Rewind has put more people in houses than Habitat for Humanity,” said president and CEO David George. “We are dedicated to helping people with less than perfect credit restore their credit so that they can take advantage of low interest rates and the buyer’s market when it comes to real estate. This gives everyone a chance at the American dream, even if they have had problems with their credit in the past.” Another program, called 4/40 for Freedom, also appears to put potentially detrimental credit history aside in favor of helping out consumers. The proposed program calls on Congress to draft a bill reducing interest rates on all home mortgages to 4% and offering new buyers 4%, 40-year loans. The program — essentially a call for a mandatory mortgage modification — would apply automatically to existing homeowners, no credit checks and no questions asked. The emergence of this trend where credit is not an issue and any scratch, dent or crater in credit history is only a small fee away from deletion illustrates an alarming view that consumers deserve the loan they want today no matter how badly they performed on a credit card yesterday. The whole point of a credit score is to keep record of credit and repayment history. Allowing a borrower to opt into a credit score the bank or lender will find more attractive is like assigning a triple-A rating to a securitization made of subprime mortgage-related junk because the investor finds it appetizing. Write to Diana Golobay.