Generally, when it comes to getting approved for a mortgage, the better your credit scores, the easier it is to obtain mortgage financing.
But what if your credit scores are low?
The time it takes to pay down balances and/or fix errors can seem like an eternity before it hits your credit report. This is especially true when you’re in the process of buying a home.
WHAT IS RAPID RESCORING?
Rapid rescoring is essentially exactly what it sounds like – a rapid way to modify your credit scores.
The process of rapid rescoring is used by mortgage lenders and brokers to help boost a borrower’s credit scores. This method can add some much-needed points to credit scores – well – rapidly.
Instead of taking months, with rapid rescore, errors such as charge offs, collections and judgements can be corrected in a matter of days.
The amount of improvement to your credit scores will vary based on the types of things being corrected, as well as the overall state of your credit. The difference can be a few points to hundreds of points.
RAPID RESCORING IS NOT THE SAME AS CREDIT REPAIR
The use of rapid rescoring should only be done with the help of a mortgage lender or broker, not credit repair companies.
According to the Fair Credit Reporting Act (FCRA), borrowers cannot be charged for disputing inaccurate information on their credit reports. Further, rapid rescoring is not a means of disputing negative information.
Rapid rescoring can be fairly expensive. Fees can run anywhere from $25-$40 per account, per bureau being updated. As an example, if you have four accounts on your credit that need corrected or updated, those fees could add up fairly quickly.
3 bureaus x $40 = $120 x 4 accounts = $480.
Mortgage lenders and brokers can NOT charge the borrower for any part of this cost. As such, not all lenders or brokers offer the program.
WHAT ARE THE STEPS INVOLVED WITH RAPID RESCORING?
Because the information on your credit report can significantly impact your ability to get a mortgage loan, as well as the terms of the loan, the first step is to obtain a of copy of your credit report.
The Fair Credit Reporting Act (FCRA) requires that each of the nationwide credit reporting agencies – Equifax, Transunion and Experian – to provide you with a free copy of your credit report, at your request, once every 12 months.
In addition to the three reporting agencies, there are a number of sites that will provide you with a free copy.
The phases involved with rapid rescoring will vary slightly according to the reasons for the rescore.
For example, if a consumer’s credit scores are low due to high balances on their credit cards, the first step would be to pay down the credit card(s).
Whether it’s because they’ve paid down the balance, or they’ve found an error on their credit report, the next step is for the consumer to contact the creditor. The goal is for the creditor to correct the error and provide any supporting documentation.
The consumer provides this documentation to the lender or broker. The lender or broker then uses this documentation for the rapid rescore.
The turnaround time for the rescore is typically between three to seven days.
By comparison, using traditional channels in which the consumer gets the creditor to update an error and then report this information to the credit bureaus, can take anywhere from several weeks to even months.
The time it takes going the old-school method can seem like an eternity when the mortgage approval for your new home hangs in the balance.
Rapid rescoring is a great way to quickly erase incorrect information off your credit report in order to qualify for a mortgage.