Credit Scores: What is Rapid Rescoring?
You've probably come across claims made by certain companies that they can fix your credit in 24 hours. Most of those claims are fraudulent, but you can get your credit score recalculated in a few days by any one of the 200 companies who specialize in rapid credit rescoring and who have special relationships with the three major credit reporting agencies -- Equifax, Experian and TransUnion. In addition, these rapid rescoring companies can only be accessed by mortgage lenders and brokers and not by the general public. This means that if you want to have your credit report rapidly rescored, you must ask your mortgage lender to do it for you. The cost is modest, around $25 to $50 for each item they fix, and is certainly worth paying since an improved credit score can result in reducing your monthly mortgage payment significantly.
To illustrate how rapid rescoring can made a difference -- suppose you have been a victim of identity theft and there is a credit card account you didn't open appearing on your credit report showing a 30 day late payment. Normally, it would take at least a month (but more realistically, two or three months or longer) to clear this matter up and get the item removed from your credit report. However, in the meantime, this negative item on your credit report has lowered your credit score to 620, which means you will be approved for a mortgage loan, but at an interest rate of 7 % instead of the 5.7% rate being offered to those with credit scores above 720. As a result, your monthly mortgage payment is going to be about $130 higher than it would be if that negative item wasn't on your credit reports. You ask your mortgage lender to contact a rapid rescoring company and have the credit card account removed from your credit report and your credit score recalculated. Three days later, your credit score is now above 700 and you qualify for a mortgage loan at 5.5%, saving you from paying $46,800 in additional interest over the next 30 years.
In places where housing prices are through the roof, such as California, an interest rate even one percent lower will significantly reduce your monthly payment, for example, by as much as $1,000 on a very high priced house!
Who should use rapid rescoring? Those with FICO credit scores below 680 should check in to rapid rescoring if planning to apply for a mortgage loan in the next month. However, it would be much better to try and fix the problems yourself a good six months before you even apply for a mortgage loan. This is because a rapid rescorer can't get negative items, such as late payment notations, or items that are in dispute removed. A rapid rescorer also cannot improve your credit score if your problem is too much debt that you can't pay off today. A rapid rescorer can only improve your credit score if the creditor admits to a mistake or agrees to remove specific information. For example, you might owe a big balance on a credit card that is negatively affecting your ability to get a lower mortgage interest rate. You can pay off the credit card electronically today and have a rapid rescorer get your credit score recalculated within 72 hours rather than waiting for your payment to show up on your credit report a month later.
Note that a rapid rescorer requires evidence to complete the rescoring process. For example, a creditor might have sent you with a letter admitting that an account being reported as yours really isn't yours and they intend to remove it from your credit history. Or, a creditor might admit that an account was fraudulently opened in your name by a thief and has agreed to remove it from your credit report. Although a rapid rescoring company usually requires that you provide proof, some might contact the creditor directly and obtain the proof for you.
It is also important to note that a rapid rescorer can't fix all problems within 72 hours as they often claim in their advertising. Sometimes it might take them a week or two, but in any event, it is always more rapid than fixing credit report errors the traditional way -- by mail, waiting a month or two for changes to occur in one's credit report before a new, improved credit score can be calculated.
Again, it is better to improve your credit score at least six months before you apply for a mortgage loan. To get the process started, order your free credit reports now at www.annualcreditreport.com and start working on correcting errors and paying off debt before you even apply for a mortgage loan. You can also order your three FICO credit scores at myfico.com for a small fee.
See also: Credit Scores and Mortgage Loans
Next topic: Frequently Asked Questions about Credit Ratings
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