What Is a Rapid Rescore? [And When to Use It]
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The rapid rescore process is a service most commonly purchased by a mortgage lender when a prospective homebuyer’s credit score needs a slight improvement for either qualifying for a mortgage loan or securing a more favorable interest rate.
A rapid rescore expedites the process of updating the consumer’s credit history, which accounts for very recent changes.
What Is a Rapid Rescore?
A bank, credit card company, or other lender typically transmits credit account activity to Equifax, Experian, and TransUnion on some regular cycle or interval. Often, the credit report information is sent every 30 to 45 days.
Once the credit reporting agencies receive the updated credit file, they will accordingly update the credit reports. Therefore, consumer credit information, the basis for calculating credit scores, will not represent a true “real-time” summary.
Mortgage loan officers or mortgage brokers may order a rapid rescore from a credit reporting agency for a fee. Here, the credit bureau will promptly update a borrower’s credit history, which will result in a recalculation of the consumer’s credit score that reflects recent activity.
Mortgage lenders typically establish a minimum credit score requirement or threshold for different mortgage loan products. Ideally, the credit rescore will improve your credit score, enabling the mortgage process to continue moving (hopefully) toward a home loan approval.
For many consumers, a home is among the largest purchases they will make; therefore, those with bad credit may struggle with qualifying for a mortgage loan or only qualify for the least desirable loan options with exorbitant interest rates.
Most mortgage loans are long-term, commonly spanning 15 to 30 years. Even a 1% decrease in the interest rate may result in thousands of dollars in savings over the life of the loan term.
The Rapid Rescoring Process
Prospective homeowners seeking mortgage loan financing or applying for most types of new credit should expect that the potential lender will review their credit history, or at a minimum, check their credit score.
Mortgage lenders may require that applicants mitigate active collection accounts such as those stemming from delinquent credit card debt. For example, Fannie Mae requires payment of any accounts that “could result in a lien” before closing.
Often, mortgage lenders will review all negative information on credit reports and advise an applicant on certain accounts within the credit history that, when paid, will result in boosting your credit to a sufficient level for obtaining loan approval.
Another possibility involves credit reports that contain inaccurate information that requires correction. For example, a delinquent account listed on your credit report might have mistakenly been linked somehow with your personal information.
Next, the lender or collection agency must verify receipt of the payment for the credit bureau so they can update your credit history. Keep in mind that the information from a credit reporting agency is then used for recalculating a credit score.
The majority of consumer credit score calculations are a result of a formula created by the Fair Isaac Corporation, now known as FICO. Your FICO score is a three-digit number that represents your overall creditworthiness.
Consumers who plan on pursuing a home mortgage should always obtain and review an updated copy of their credit reports for any potential errors and resolve them before applying.
How Long Does It Take for a Rapid Rescore?
Because mortgage loans are among the most time-sensitive types, rapid rescoring is usually a process predominantly seen in this realm of financing. The general consensus affirms that the rapid rescore process usually takes only a few days.
Keep in mind that delays associated with a mortgage lender or creditor are often beyond the consumer’s control.
Informative Research (IR), a technology and research firm in the mortgage and insurance industry, explains the rapid rescore process in detail. Rapid rescoring is an option for promptly updating most delinquent accounts or any adverse information reported in error.
IR noted that the credit bureaus cannot update any credit report entries marked with the Equal Credit Opportunity Act (ECOA) code “T” for “terminated” and may only be deleted; therefore, you should avoid delaying the rescore process by contacting these lenders.
The standard processing time for the credit reporting bureaus is three to five business days. Equifax and Experian offer one business day “rush” processing for an additional fee, but TransUnion offers no such service.
How Much Does Rapid Rescore Cost?
Only a lender may initiate a rapid rescore and some of them may not offer this service. The lender will also pay for any charges incurred in the rapid rescore process.
The Fair Credit Reporting Act (FCRA) now prohibits lenders from imposing fees for rapid rescoring or otherwise disputing or correcting credit report data. Lenders will likely offer rapid rescoring and absorb the costs because it might represent the lone option for securing approval.
Unlike Equifax, which adds no additional cost, Experian and TransUnion impose a $20 charge for each credit report entry requiring modification. Experian is the lone bureau that will participate in voice calls during this process.
Equifax and Experian’s one-day rush processing option requires payment of an additional $40.
Should I Consider Rapid Rescoring?
Rapid rescoring is a viable option for those seeking a mortgage loan who have a current credit score just lower than a score that would allow them eligibility for approval, a lower interest rate, or other more favorable terms.
The following table summarizes the factors that determine a consumer’s FICO Score.
The Categories That Influence FICO Scores
General Category | Percentage of Influence |
Payment History | 35 % |
Amounts Owed | 30 % |
Length of Credit History | 15 % |
New Credit Accounts | 10 % |
Variety of Accounts (Credit Mix) | 10 % |
Source: myFICO
In the aforementioned table, the first two factors have the greatest relevance regarding rapid rescoring. Payment history, the largest single factor, may potentially improve by paying delinquent credit accounts and correcting any errors adversely impacting your score.
Paying off delinquent accounts is most effective for recent accounts from the past couple of years.
One important component within the second accounts owed category is the credit utilization rate or credit utilization ratio, expressed as a percentage using the following simple formula:
Utilization Rate = Current Balances on All Revolving Accounts / Total Credit Limit (Maximum) on All Revolving Accounts.
The credit utilization rate involves credit card accounts; specifically, the proportion of current credit incurred relative to the maximum credit available. Most experts agree that consumers should maintain a ratio of below 30%.
Consumers considering rapid rescoring that have some cash on hand could make a substantial payment, reduce their balances owed, and improve their utilization ratio.
Other Options for Raising Your Credit Scores
Based on the significant influence that payment history has on your credit score, ensure that all accounts are paid on time. Consider using reminder tools that will send you an email or text reminder as due dates approach or enroll in automatic recurring bill payment options.
Explore opportunities for improving your credit utilization rate, particularly if it currently exceeds 30%. Two ways of doing so include paying down existing credit card balances and contacting your credit card issuer regarding a credit limit increase.
Obtain a copy of your credit report each year and review the entries so that any errors that may adversely impact your credit are detected and promptly corrected. The major credit bureaus will provide consumers with a free copy of their reports each year.
A credit builder loan is another good option for consumers seeking credit repair methods or ways of building credit and boosting their score.
CreditStrong, a subsidiary of an established, five-star rated bank based in Austin, Texas, offers installment loans specifically used for improving your credit. Unlike a typical loan, the “borrowed” funds remain in secured savings accounts throughout the loan term.
Each month, you simply make a single, affordable monthly payment toward the loan balance. CreditStrong will report these payments to all three major credit bureaus, which allows for establishing a good payment history that should boost your credit score.
After making the loan payments, the original loan funds in the savings account become available to the borrower.
FAQs
Can I Rapid Rescore Myself?
No. Only a lender may order a rapid rescore on your behalf. Not all mortgage lenders offer rapid rescoring services.
Some home mortgage lenders such as OVM Financial use a “rapid rescore simulator” for analyzing and predicting how taking certain actions i.e., making a large payment on an existing credit card account and then requesting a rescore will help your credit score.
Always exercise caution if an organization other than a mortgage lender that you are already working with on a home loan offers you rapid rescoring services. Unscrupulous individuals might use rapid rescoring, like some other credit services, to scam innocent consumers.
What Documentation is Needed for a Rapid Rescore?
Advantage Credit, a provider of credit reporting services for the mortgage industry, explained that documentation requirements apply for any credit accounts involved in the rescoring.
Any account that was paid must be confirmed with a mailed statement or “online snapshot” showing the revised account balance. The proof must contain the lender or collection agency’s logo, the borrower’s (consumer’s) name, and at least the last four digits of the account number.
Who Pays for a Rapid Rescore?
Only a lender or broker may order a rapid rescore and they also assume responsibility for paying any of the fees that the three major credit reporting agencies may impose for the service.
Lenders typically provide rapid rescore as a value-added service, which they might already factor into closing costs. Federal laws prohibit companies from charging consumers for conducting these types of processes.
Because credit reporting agencies do not market the service directly to consumers, pricing details are vague. Bankrate provided generalized pricing for rapid rescoring ranging between $20 and $100.
Crediful, a guide for consumer personal finance, says that prices range from $25 to $50 per account on each credit bureau’s report. Another source stated that Equifax and Experian now offer one-day “rush processing” for an extra $40.
CreditStrong helps improve your credit and can positively impact the factors that determine 90% of your FICO score.