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How Advisors Can Help Clients Improve Their Credit Scores


Research from Elevate shows that 15% of people with nonprime credit scores earn an individual income of more than $100,000 a year. Additionally, new data from CreditCards.com show that while credit card debt is most prevalent among the lowest earners, 37% of those who carry a balance from month to month make at least $100,000 annually.

“Even wealthy people can have less-than-ideal credit for all sorts of reasons,” says John Campbell, east region head of wealth planning at U.S. Bank Private Wealth Management. Yet having a better credit score can make a meaningful difference in their buying power. “It could have an impact—even for those who might not be struggling with an especially low credit score,” Campbell says.

Sometimes advisors avoid the topic because they mistakenly think clients, especially wealthier ones, aren’t plagued by credit-worthiness issues. But financial advisors who help clients with credit issues provide an important value-add that can have long-lasting benefits.

Working with clients on credit-related issues is especially pertinent now, given that two in five people believe they will need to rely on credit to cover essential and unexpected expenses over the next three months, according to an August survey from


Experian
.

What’s more, two in three expressed some degree of concern that their credit score will negatively impact their ability to access credit over the same time period, the Experian survey shows.

Here are eight ways advisors are helping clients overcome credit-related issues.

Provide education. Advisors should lay out for clients that credit scores generally range between 300 and 850. A good credit score is 670 to 739 on the FICO Score range, while a credit score of 661 to 780 is good on the VantageScore range, according to Experian. 

Next, advisors can help clients understand the factors that go into a solid credit score and offer insights to help them achieve one. These factors include payment history, credit utilization, credit history, and credit mix, Campbell says.

Determine what went wrong. Financial advisors say clients sometimes are surprised to learn that their credit isn’t as stellar as they assumed. Often, this happens when they go to apply for a car or home loan and are quoted higher-than-expected rates. They don’t always know why they have the score they do or what they can do to improve it. 

The culprit could be errors on the person’s credit report, irresponsible financial behaviors early in their careers, or a job loss. Or maybe they’ve fallen behind on some bills, or haven’t built up a robust credit history. That’s where advisors can have the most impact—by digging deeper to help uncover the roots of the problem and then suggesting fixes to set clients on a better path. Even small changes can make a big difference in a client’s credit score, advisors say.

Fix errors. Mistakes can easily derail your credit. That’s why Jeffrey Bush, chief executive and chief financial officer at Informed Family Financial Services in Norristown, Pa., suggests everyone carefully scrutinize their credit reports to make sure they’re accurate. Mistakes, or worse—identity theft—can negatively impact a person’s score. That’s why it’s advisable for people to check their score with each of the three main credit reporting agencies—


Equifax
,



TransUnion
,

and Experien—once a year, which they can do for free by visiting www.AnnualCreditReport.com. They can also monitor their credit more regularly by signing up for free, or paid, credit-monitoring services.

Set up good habits. Some clients struggle with lower credit because they haven’t been meticulous about paying their bills on time. For these clients, Brian Seay, founding partner at Capital Stewards in Madison, Ala., recommends they set their bills on autopay. This way, they will be sure to pay on time, which will help boost their credit score, but there can be issues, so people need to be sure to pay attention to the charges they’re wracking up. Some advisors also offer bill-pay services.

Provide appropriate tools….



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