Many mortgage applicants have never heard of “rapid rescoring” or CreditXpert score simulations — in part because some lenders choose not to educate them.
That’s unfortunate, because anyone who’s looking for the most favorable interest rates and terms in 2018’s rising interest rate environment ought to know at least the basics about them — especially if their current score puts them near a break point between getting a better deal or qualifying for a loan altogether.
Here’s a quick primer. Say you spot one or more errors in your credit reports — maybe an account you’ve paid off in full but is still being reported as open and delinquent or a collection-account issue you’ve settled with a creditor but is still reported as ongoing. Both are potentially significant negatives for your credit score but if you have documentation, you can show they’re out of date.
What to do? You could begin the standard process of getting them corrected by asking the creditors involved to request the national credit bureaus to amend your files. But here’s the problem: You’re under contract to buy a house and you need the errors corrected immediately — or you risk not qualifying for the mortgage or interest rate you need.
Fixing the errors directly with the credit bureaus could take weeks. Enter rapid rescoring — a process that frequently can get the erroneous information corrected in as little as two to three days. It works like this: You provide the documentation about the accounts to your loan officer, then request a rapid rescore using the loan officer’s mortgage credit-report vendor. The vendor’s staff will then verify your documentation with the creditor(s) involved and provide the corrected information directly to the credit bureaus.
The updates should show up quickly on your credit files, allowing the vendor to supply a new and more accurate credit report to your lender along with a new — and typically higher — credit score.
Paul Wohkittel of CIS Inc., a national credit-reporting company, says that although the improvements in scores vary with the severity of the erroneous credit-file information being corrected, he’s “seen scores that go up by 50 to 60 points,” saving applicants thousands of dollars in higher mortgage payments over time.
Terry Clemans, executive director of the National Consumer Reporting Association, a credit-industry trade group based in Roselle, Illinois, calls rapid rescoring “a great tool anytime consumers find something in error but need to expedite the [correction] process.”
But rapid rescoring is not for everyone who seeks a quick score boost. For example, if the negative information depressing your score is accurate, it won’t help. Then there’s the expense. Rescoring can cost $30 or more per updated account per credit bureau. So if you’ve got multiple accounts to correct in all three major national bureaus, the total cost can be significant. Plus, there’s another wrinkle: You as a consumer are not permitted to pay directly for rescoring. Your lender is required to foot the bill, though that might find its way into your total loan fees at settlement.
The expense of rapid rescoring is why some lenders are reluctant to raise the subject with certain applicants. Paul Skeens, president of Colonial Mortgage Group in Waldorf, Maryland, told me that “a lot of people who have problems on their credit reports simply don’t have a lot of money to spare.” But for those who can afford it, “it really does work.” One applicant who had a good income but a 680 FICO credit score — too low for the best available mortgage rate — zoomed to a much better 740 after a rapid rescoring, recalled Skeens in an interview last week.
Here’s another valuable mortgage credit tool you should know about. If your score isn’t quite what you need but the information in your files is accurate, your lender should be able to obtain a “what if” simulation through its credit vendor. Using a proprietary model marketed by Baltimore-based CreditXpert Inc., the simulation can estimate the credit score changes available to you by taking certain actions. For instance, the simulation might reveal that by paying down a specific credit card balance or by lowering your currently maxed-out “utilization ratio” on another account, you could improve your score by enough points to get you approved for a better deal.
Bottom line: Be aware of these options. When you apply for a mortgage, you’re not necessarily locked into your score. You just might be able to do better.