While the nation was primarily focused on watching Former FBI Director Jim Comey testify before the Senate House Intelligence Committee recently, GOP members of the House of Representatives took advantage of the diverted attention and very quietly passed a bill that would, effectively, decimate the Dodd-Frank banking regulations put in place by President Obama’s administration in 2010.
If you haven’t been following this story, here’s a quick refresher course. Dodd-Frank is the umbrella name given to a group of regulations put in place in 2010 that are supposed to prevent another economic crisis like the one we experienced when the housing bubble burst. One of the most important accomplishments of Dodd-Frank was the Consumer Financial Protection Bureau, which protects consumers from predatory lending practices and makes sure the major mortgage lenders don’t start wreaking havoc with homeowners.
What does this mean for you? Nobody is entirely sure, yet. The bill still has to be passed by the Senate and leaders there are taking a slightly more bipartisan approach. And, while much of the focus has been directed toward all of the ways the repeal of Dodd-Frank can hurt consumers, it’s also worth noting that there is a real chance it could make borrowing money a lot easier, especially for those who might otherwise be flagged as “high-risk.” These borrowers will no longer be forced to deal only with skeevy payday lenders but will be able to access monthly installment loans that are approved quickly, mortgages, business startup financing, etc.
Before you go running out to apply for a huge loan, however, take a breath. The repeal of Dodd-Frank will take months to finalize and even longer to be put in place. You aren’t going to qualify for that mortgage tomorrow. What you can do, while waiting for the legislation to pass, is work on your current financial situation so you’re ready to go when the regulations are lifted and the banks are in a better position to lend. Here’s how you do that.
1. Fix Your Credit Errors
Get a copy of your credit report and make sure that it is error-free. Report any errors you do find to the credit reporting bureau and ask that the error be removed. The removal process can take a couple of months to finalize, so the earlier you get started the better.
2. Raise Your Score
There are plenty of resources out there for people who want to raise their credit scores (which is pretty much everybody). Do not pay any company that claims it can raise your score by a bunch of points within a short period of time. Instead, take stock of your debts, your income, etc. Work on paying down your debts. The best way to start this is to contact your creditors and ask if they might be willing to settle any closed accounts for less than the amount due. Some will offer you a reduced settlement amount because they’d rather get a larger payment now than a bunch of smaller ones over a longer period of time.
3. Increase Your Taxable Income
One of the factors that banks will continue to consider when making lending decisions is the applicant’s debt to income ratio. That ratio might relax after the Dodd-Frank repeal is finalized, but it will still exist. The larger the gap between how much you earn and how much you owe (in favor of the earnings, of course) the better you’ll look. It’s best to focus on earning opportunities that require documentation like second jobs, 1099-contractor gigs, etc These will come with proof of how much you earn, how long you’ve been employed, etc.
This is pretty standard advice, right? That’s because at the end of the day, even with the regulations relaxed, or even repealed, you’ll still want to present yourself in the best possible light to whichever lender you choose to work with.
