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 issue 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?
A rapid rescore is a way to raise your credit score quickly to help you get approved or qualify for better rates and more favorable loan 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. It allows you to 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).
Optimal Situations and Timing for a Rapid Rescore
When you’re eyeing a new home or looking to snag the best possible mortgage terms, timing is everything. A rapid rescore can be a game-changer for your credit score and, ultimately, your loan conditions. But when is the right time to consider a rapid rescore? Let’s break down the scenarios where it makes the most sense.
When You’ve Paid Down Debt
If you’ve recently paid off significant amounts of debt, but your credit report doesn’t yet reflect this, a rapid rescore could be your ticket to a better interest rate. Lowering your credit utilization ratio—how much credit you’re using compared to how much you have available—can have a positive impact on your score. If you’ve made big payments towards credit card balances or other loans, don’t wait for the monthly update cycle; a rapid rescore can reflect these changes almost immediately.
Ahead of a Mortgage Application
The period right before you apply for a mortgage is critical. Your credit score dictates not just approval odds, but also the terms of your loan. A higher score can mean lower interest rates, which translates to thousands of dollars saved over the life of your mortgage.
If there are easy wins to boost your score—like updating paid-off debts or correcting errors—a rapid rescore before submitting your mortgage application can make a substantial difference.
After Correcting Errors on Your Credit Report
Errors on credit reports are more common than you might think. If you’ve found and disputed inaccuracies—such as wrong account information or mistakenly reported late payments—getting a rapid rescore after these errors have been corrected can quickly update your score to reflect your actual creditworthiness.
To Qualify for Better Loan Terms
Sometimes, you’re on the cusp of qualifying for a more favorable loan tier. This could mean a difference in interest rates, down payment requirements, or both. If your credit score is just a few points shy of the next tier, a rapid rescore can provide the quick boost you need to lock in better terms.
If You’re a Victim of Identity Theft or Fraud
Victims of identity theft or fraud can see their credit scores plummet through no fault of their own. After resolving these issues and removing fraudulent charges or accounts from your report, a rapid rescore can quickly restore your credit score to its rightful state, helping you recover from the financial impact of identity theft more swiftly.
Before a Big Purchase Requiring Financing
Not limited to home purchases, a rapid rescore can also benefit you if you’re planning any large purchase that requires financing, such as a car. Better credit scores secure better financing rates, reducing the overall cost of your purchase.
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 mortgage 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?
When you’re looking to improve your credit score quickly, especially in the context of securing a mortgage or refinancing, the concept of a rapid rescore might sound too good to be true. So, the pressing question is: does rapid rescore actually work? Let’s dive into what you can realistically expect from this process.
The Success Rate of Rapid Rescoring
Rapid rescoring is designed to update your credit report swiftly with the most current information. This could include the payoff of debt, correction of inaccuracies, or any changes that positively affect your credit score. But how successful is this strategy?
While there are no comprehensive public studies that pinpoint an exact success rate for rapid rescoring, feedback from the mortgage and financial industry suggests it’s highly effective when used in the right circumstances. Mortgage lenders and borrowers alike report seeing significant improvements in credit scores, often within a few days, leading to better loan terms and interest rates.
Understanding When Rapid Rescoring Works Best
Rapid rescoring works best when there is clear, actionable information that can be quickly updated on your credit report. This includes:
- Paying down balances on credit cards to reduce your credit utilization ratio.
- Correcting errors or inaccuracies on your credit report, such as wrong account statuses or balances.
- Adding missing positive information, like a history of on-time payments for an account not previously reported.
In scenarios where these conditions apply, borrowers have seen their scores increase by anywhere from a few points to over 100 points. The extent of the increase depends on the specific changes made to the credit report.
It’s Not a Fix for All Credit Issues
It’s important to understand that rapid rescoring is not a cure-all for every credit issue. It cannot remove legitimate negative marks like late payments, bankruptcies, or foreclosures that are accurately reported. The effectiveness of rapid rescoring lies in its ability to quickly update and correct your credit report, not in magically fixing poor credit habits over the long term.
What Rapid Rescoring Can Do for Your Credit Report
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.
If you find any incorrect or outdated information on your credit report, you can dispute it with the credit reporting agencies reporting it. 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.
With rapid rescore, once a negative item has been removed, it will reflect on your credit score much quicker.
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 mortgage 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.
Rapid Rescoring vs. Credit Repair: Knowing the Difference
Rapid Rescoring vs. Credit Repair: Understanding the Differences
When you’re in the market to improve your credit score, you might come across two terms: rapid rescoring and credit repair. Though both aim to enhance your credit situation, they operate differently and serve distinct purposes. Let’s break down the differences to help you decide which route is best for your financial goals.
Rapid rescoring is a fast-track process used primarily by mortgage lenders or brokers to help potential borrowers update their credit files in a hurry. This service is usually initiated by the lender and can correct inaccuracies or update information on your credit report within a few days. The primary goal is to improve your credit score quickly to qualify for a loan or secure better loan terms.
Credit repair is a broader, more comprehensive approach to fixing your credit history and improving your credit score over time. It involves identifying and disputing errors or outdated information on your credit report, negotiating with creditors to remove negative items, and implementing strategies to improve your credit health.
This process can be done by individuals themselves or with the help of a credit repair agency and usually takes several months or even years, depending on the complexity of your credit issues.
- Purpose: Rapid rescoring is specifically designed to quickly update your credit report and score during the loan application process. Credit repair is aimed at gradually improving your overall credit health through a series of actions over time.
- Time frame: Rapid rescoring can update your credit report within 3 to 7 business days. Credit repair, on the other hand, is a longer process that can take from a few months to a couple of years to see significant results.
- Initiator: Rapid rescoring is generally initiated by your lender or mortgage broker, and the service is often paid for by them as part of your loan application process. Credit repair can be initiated by you, either on your own or by hiring a credit repair service.
- Scope: Rapid rescoring deals with quick updates for specific items on your credit report, such as paying down balances or correcting errors. Credit repair involves a more extensive review of your credit report to challenge and remove inaccurate, unfair, or outdated information.
- Cost: Since rapid rescoring is often a service provided through your lender, there may be little to no direct cost to you. Credit repair services, if you choose to use them, can vary widely in cost, typically charging a monthly fee for as long as you use their services.
Preparing for a Rapid Rescore: Steps and Requirements
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. Thereafter, all you’ll have left to do is pack up some boxes and pick up your keys!