A rapid rescore can fix your credit score in a hurry
A few credit score points can mean the difference between a good mortgage rate, a lousy one or getting a loan at all. But take heart: If errors are dragging down your score, you can get them fixed, just in time for your much-anticipated closing.
Rapid rescoring, a practice employed by mortgage lenders and
brokers to help lift clients' scores to qualify for better loans, allows borrowers
to get accurate information updated into credit files within a few days, rather
than waiting weeks or months for the credit bureaus to do it on their own.
That faster timetable could save you thousands of dollars on your loan. In the 2012 mortgage market, "Raising someone's
middle FICO score
from 699 to 720, for example, will save 1.25 percent in fees," says
Joe Parsons, a senior loan officer at PFS Funding in California. "In our residential mortgage practice, we
frequently do rescores for borrowers. The cost is minimal, and the improvement
in mortgage pricing is very significant."
"When you're in a tight lending environment, every
single point counts," adds Karen Carlson, director of education for the
nonprofit Florida credit counseling agency InCharge Debt Solutions. That's
especially true, she says, if you have a middle-of-the-road credit score and
are hoping to take advantage of today's record-low interest rates. "It's hard
to qualify for a loan, but if you qualify, the rates are phenomenal," she adds.
How rapid rescoring works
A rapid rescore is essentially "an unofficial updating of the credit file,"
says Wayne Sanford, president of the Texas-based credit consulting firm New Start
For example, if you pull your credit reports and see
that there are legitimate errors on them that are pulling down your credit score,
a rapid rescore can help you get those errors corrected much faster than if you
tried to dispute them yourself.
"If you try to do it yourself by doing a dispute
directly with the bureaus, then they have 30 days, technically, to investigate
the dispute and get back to you with an answer," says Mindy Leisure, director
of product development for Advantage Credit, a Colorado-based company that provides rapid rescoring
services for loan officers.
However, if you have a rapid rescoring service get
the errors corrected for you, they'll provide proof to the credit reporting
agencies that the errors are bogus and have your credit score recalculated to
reflect the changes, usually within a few days.
Your mortgage broker may also recommend a rapid
rescore if you have high balances on your credit cards
and just need to add a
handful of points to your score to get the loan you want. "Loan officers have access to something called
a 'what-if' simulator," says Sanford. "A what-if simulation is basically a
mathematical model that the mortgage companies work with to say, 'What if they
paid off their credit card?'"
When you're in a tight lending environment, every
single point counts.
|-- Karen Carlson
InCharge Debt Solutions
If a loan officer sees that you can boost your score
by enough points to qualify for a lower-interest loan, he or she may ask you to pay
down your credit cards to below 30 percent of your credit limit and have you
print out proof of your new balance.
That information will then be expedited to the
credit reporting agencies so they can update your file without waiting
for the credit card issuer to report your updated information. "There are some
credit cards that report to the bureaus at the beginning of the month, some at
the end of the month, some only every other month," says Leisure. "By doing a rapid rescore, we can get that information corrected
within three business days."
For Byron Nelson of Dallas, getting his score
updated faster meant getting approved for a home loan that he may not have
qualified for otherwise. Just seven points shy of his target credit score, Nelson paid
down one of his credit cards and sent the proof back to his lender, which initiated a rapid rescore. Having previously raised his credit score from the
low 500s to the mid-700s, the approval that he received soon after was a major
victory. "It just changed my life, drastically, for the better," says Nelson.
rescoring is not credit repair
of rapid rescoring are quick to point out that it's not a form of credit repair
-- an industry whose bad apples promise, illegally, to erase accurate negative information from consumers' credit reports. Rapid rescoring should only be done through a mortgage broker or lender. "I'd be a little leery actually of anything
that offered a rapid rescore directly to the borrower," says Leisure. "That
almost borders on credit repair and when it comes to credit repair, I just say
Typically, a rescore costs between $25 and $30 per
updated account. However, your mortgage lender or broker is supposed to pay for
the service, not you, says Leisure.
"I know there are a lot of mortgage brokers who pass
the cost of a rescore on to their borrowers. But they really aren't supposed to
do this," she says. That's because credit reporting agencies view rapid rescore
requests as an "expedited dispute process," she says and, under the Fair Credit Reporting Act, borrowers aren't allowed to be charged for disputing inaccurate
information. "A lot of loan officers will tell you they are not aware of this,
but they are," she adds. "It even states on our forms that the mortgage company
fills out to request a rescore that the borrower cannot be charged for it."
It's also important to remember that the only information
you can dispute is inaccurate information, says PFS Funding's Parsons.
"What we find is when somebody's got a low credit score, they have lots of
excuses for why this [negative information] is on their report," he says.
However, you can't explain away accurate blemishes, such as missed credit card payments.
Nor can you make them magically disappear. "A lot of
people don't realize that," he adds. They will pay off a delinquent account and
expect it to fall off their report. However, it doesn't work that way, he says.
When it comes to negative but accurate information, all you can do is wait up
to seven years for the negative information to disappear.
Quick updates for a fast-moving world
The good news is if your complaint is legitimate, you have a good chance of getting it rescored when you need. That's a big deal for consumers who are used to faster answers, says InCharge Debt Solution's Karen Carlson.
"In today's world of apps and instant feedback and
real-time data, I think that rapid rescoring is something that people are going
to expect," says Carlson. As people get used to on-demand answers, waiting a month or more for a credit score to be recalculated just isn't going to cut it. "Consumers are demanding these real-time updates in order to achieve their financial goals," she adds.
See related: Steps to boost credit score when a mortgage is the goal
Published: June 29, 2012