Buying a home is probably the largest purchase you’ll likely make in your lifetime. So it comes as no surprise that the entire process can be a stressful situation. After all, how often do you make a six-figure purchase?
Between negotiations with the homeowner and a complex loan underwriting process, there are countless opportunities for things to go wrong. In fact, buyer financing is one of the likeliest issues to prevent a closing from taking place.
A common problem that many people have is a credit score that is borderline. This can be a real problem when searching for the best interest rates, the lowest down payment amount, or just trying to get approved for a loan.
A solution offered by mortgage lenders can help your credit score quickly get the boost it needs during the home buying process. It’s called a rapid rescore, and if you’re considering purchasing a house or condo soon, it’s definitely worth learning more about.
What is a rapid rescore and how does it work?
A rapid rescore is a way to raise your credit score quickly to help you get approved or qualify for better rates and terms during the mortgage application process.
Maybe you’ve updated some important financial information already, but the changes haven’t been reflected on your credit report yet. Or perhaps you want to pay down enough debt to qualify for a lower rate.
Your mortgage lender can help you look at your credit history with a rapid rescore simulator and figure out hypothetically what actions could get your credit score to where it needs to be. Then you take those actions.
Since positive movement generally takes several weeks to appear on your credit report, you get a rapid rescore done. Those new items will quickly show up on your credit history (and ideally, give you a new credit score as well).
When would you need a rapid rescore?
When you’re applying for a mortgage loan, credit card, or any form of credit, lenders look at your credit scores to determine whether or not you’ll be approved. They also use them to decide what interest rates you’ll get and how much of a down payment you’ll need to pay.
It’s a big deal because even a difference of just a quarter percentage point in your interest rate can save you (or cost you) tens of thousands of dollars over the course of your mortgage.
And it’s one thing to be prepared to pay for a 5% down payment, but what if your lender suddenly requires a 10% down payment because of your credit scores? That’s a $10,000 difference on a $200,000 home.
How long does rapid rescore take?
Credit report disputes with the three credit bureaus typically take 30 days to resolve. And the updates can take even longer to show up on your credit report. On the other hand, a rapid rescore takes just three to seven business days from start to finish.
The closing date on a home typically can’t be delayed beyond the original agreement. So, it’s not realistic for homebuyers to have to wait a month or more just to hear back on the results of their request to the credit bureaus.
Rapid rescoring is an expedited process that goes directly through your lender. It can have tremendous results, all within the timeframe you need. What used to take weeks or even months can be done in just a matter of days.
Does rapid rescore really work?
Rapid rescoring is usually a successful strategy. However, it can fail to produce the results you and your lender expect. It can even backfire. In some cases, your credit score may drop. But, that only happens if you’ve unknowingly taken actions that hurt your credit score before you request a rapid rescore.
In most cases, if your lender is experienced with rapid rescoring, this shouldn’t be a problem. However, make sure you discuss the details with your lender before using a rapid rescore.
What items can be addressed with rapid rescoring?
The easiest and possibly most successful item you can have updated through rapid rescoring is paying down a loan or credit card balance. Your amounts owed account for 30% of your credit score. So, if you have lingering debt, it might behoove you to pay it off. This will help to lower your credit utilization ratio.
Plus, on top of your credit score, mortgage lenders also look at your debt-to-income (DTI) ratio. Your DTI ratio is how much in minimum debt payments you owe each month compared to how much pre-tax income you bring in.
If it’s over 43%, you might have trouble qualifying for a home loan. Your lender can use the rapid rescore simulator to give you a suggestion of how much debt to pay off to either raise your credit score or lower your DTI. Then, you can do a rapid rescore so that the information is quickly updated on your credit report.
Even if you regularly pay off your credit card balances, it might not reflect a zero balance in your credit score. This is because whatever your credit card balance was on the day they pulled your credit report, that is the amount of debt that will be factored into your loan application.
Plus, remember that most information has at least a 30-day delay. So, unless you’ve stopped using your credit cards well in advance of applying for a loan, you’re likely to see credit card balances that may not be up-to-date.
Disputing Information on Your Credit Report
Another way to raise your credit score is by filing a dispute regarding an error on your credit report. It’s always best to review your credit report for accuracy once a year. So, if something has changed or been added incorrectly since the last time you looked at it, rapid rescoring can help get it taken off.
You will also want to look for any signs of identity theft. Just remember that an item does have to be an actual error for this tactic to work.
How much does a rapid rescore cost?
A rapid rescore can cost between $25 and $50 for each account on each credit report, but luckily, your lender pays for the service. However, it has to be done with each credit bureau. So, even if there’s just one item to update, that can add up between $75 and $150.
However, federal law prevents you as the consumer from being charged for this service. That’s because the Fair Credit Reporting Act prohibits individuals from being charged for disputing information on their credit reports.
Consequently, your lender will absorb the cost of a rapid score. It’s really in their best interest to do so. They risk losing your business if you don’t qualify for the best rates and terms or any loan at all.
Is rapid rescoring the same as repairing your credit?
No, the rapid rescoring service goes directly through your mortgage lender rather than a credit repair service. Rapid rescoring is only used for quickly updating outdated information or disputing false information within a quick timeframe.
If credit repair seems like a better option, check out our list of the best credit repair services. The sooner you get started, the better, especially if you’re about to start the search for a new home.
What is required for a rapid rescore?
A rapid rescore takes a few steps to complete. Your lender can do the first several steps. Start by figuring out exactly how short your credit score is for qualifying for the loan or interest rate that you want.
Then, determine which credit reports need updating. For example, do all three major credit bureaus list incorrect or outdated information? Or do you only need to update one credit report?
Your next step is to have your lender run the simulator program. This offers solutions on what you can do to potentially improve your credit scores.
Once you figure out the information you need, it’s your job to hand over any supporting documentation to your lender.
Perhaps it’s a credit card statement showing your new low balance or other paperwork verifying a date for a particular item on your credit report. Once you provide your lender with the relevant documents, you should receive your updated credit report and credit score within just a few days.
Rapid rescoring can be extremely useful in getting approved for a mortgage or even taking advantage of the very best rates available. It gives you the chance to have all of your financial information completely updated before calculating your credit scores. This is a crucial moment in the home financing process.
You’ll need the help of a knowledgeable lender, so make sure you find someone who knows the ins and outs of the process. After that, all you’ll have left to do is pack up some boxes and pick up your keys!