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More On Rapid Rescore

Picture the scene – your client is getting ready to close on their home loan when the loan officer calls to say your credit score went down 20 points from when they originally pulled their credit. Now that 20 point decline means the difference between putting 10% down on their loan to now having to come up with 20%. Which, they don’t have because they scraped the initial 10% together and now they are tapped out. What will you suggest for them?

Suggest that they do a rapid rescore to get their score back up.

How Does a Rapid Rescore Work?

Rapid rescoring is just what you might think it sounds like – a rapid way to adjust your credit score. What might take 30 days or more, can take 2-3 business days. A rapid rescore is essentially an immediate updating of your credit file.

If you try to dispute a legitimate error on a credit report with the credit bureaus, they have 30 days to investigate the dispute and get back to you with their answer. This is far too long to wait if they are trying to finalize a mortgage loan when there are contractual deadlines that need to be met. If they have to wait for the credit bureaus to get back to them in 30 days, chances are their whole deal will probably fall apart.

So, instead, what a loan officer will do is provide the proof to the credit bureaus that the errors are bogus and have them immediately recalculate their credit score. This can all be done in a matter of a few days.

Disputing erroneous information is not the only way you can increase your credit score. Say for instance they have a high balance on one of their credit cards, their loan officer can run what is called a “what if” simulator. Basically, this mathematical simulator used by mortgage companies can determine “what if they paid off their credit card, how much would this increase their score”. If the loan officer sees this might increase their score enough to get them that better loan, they can suggest for them to pay off this credit card or pay it down below 30 percent of their credit limit. Once they pay down their card, they can print off the new balance and this can be submitted to the credit bureaus for an immediate update.

Is Rapid Rescoring the Same as Credit Repair?

Doing a rapid rescore is not the same as credit repair for a number of reasons. First of all, rapid rescoring should only be done through a mortgage broker or lender and is not offered by credit repair companies. It will typically cost between $25-30 per updated account and this fee should be paid by the lender or broker. This is because according to the Fair Credit Reporting Act, borrowers are not allowed to be charged for disputing inaccurate information on their credit reports. So, if the borrower paid for a rapid rescore, that would be in violation of the FCRA.

Secondly, they can only dispute inaccurate information when they have acceptable supporting documentation indicating a change in your credit report. Rapid rescore is not a means of disputing negative but accurate information such as late payments, foreclosures, bankruptcies and the like. For instance, they can’t pay off a deliquent account and expect it just to fall off their credit report. Having that done takes a lot more effort than just sending in the paid off information to the credit bureaus – something like that needs to be handled with the collection agencies first.

Reasons Lenders May Suggest Doing a Rapid Rescore

The bottom line as to why a lender may suggest doing a rapid rescore for your client – to close on a loan they might not otherwise qualify for in the first place. Which in the long run means money for the lender and getting a better loan for their customer.

As stated before, mortgage brokers or lenders are the only ones who should be providing rapid rescores. According to a Rapid Rescoring website which provides lenders this service, here are some of the steps you may need to follow:

Find out how many points you need to qualify for the better loan program.

Which one of the three credit bureaus do they need contact to raise their score. Since all three bureaus will have different scores, which is the one hurting them?

Run the “score simulator” associated with the program their lender is using. This will lay out what they need to address to raise their credit score.

The borrower will need to address all the suggestions that came out of the “score simulator” and give this completed documentation to their lender. Be it a new balance on their credit card or maybe some other documentation to support the new information.

The lender will provide this information to the credit bureau and they should get a new credit score 72 hours later.

In the eyes of the lender, doing a rapid rescore for them is not an inexpensive procedure but they will make it up in the revenue they receive from closing the loan. In the end, rapid rescoring can be a win-win situation for the borrower and the lender. Just remember, this is not a form of credit repair and there may be some negative issues still lingering on credit reports that you will have to address for them.

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Credit Score Tool

Experian provides a chance to test your clients credit against their neighbors with its National Score Index.

Using this tool, you type in your zip code and out pops the “score index,” the average credit score based on a representative sample of consumers, for the nation, region, state, and your area. You also get comparable figures on other credit statistics like debt, late payments, and credit inquiries.

A nice tool.

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Utah ‘s H.B.158 could modified the states’ CP Act.

Utah’s representative Paul Ray introduced a bill: H.B. 158, that is a modification to the Consumer Protection Act in the state.

This bill language of the bill is extremely interesting which states:

Highlighted Provisions:
11          This bill:
12          .    defines terms;
13          .    under certain circumstances, requires the consumer reporting agency to give the
14      consumer, prior to purchase, a written disclosure that states that the credit score may
15      be different from the credit score used by a lender;
16          .    requires an entity that requests a consumer’s credit score, for a purpose other than
17      the extension of credit, to provide the consumer with a written disclosure that
18      includes:
19              .    the name of the consumer reporting agency that calculated the credit score;
20              .    the model used to generate the credit score; and
21              .    the consumer’s credit score;
22          .    prohibits a consumer reporting agency from refusing to sell a consumer’s credit
23      score to a requesting entity solely because the requesting entity is required to make
24      the disclosures described in this bill; and
25          .    provides enforcement procedures for the provisions in this bill.

This is the “Credit Score Disclosure Requirements” provision that is interesting. That provision would require the following:  when a consumer requests their credit score from a credit reporting agency and the credit reporting agency provides a credit score that is NOT a lender credit score that the credit reporting agency must disclose that fact to the consumer.