As former Fed Chairman, Ben Bernanke, recently found out firsthand, the mortgage process can be complicated and unforgiving. But when it comes to the credit report, are there still options to correct and improve initial findings so the end result might be loan approval or a better interest rate? Absolutely. One of the ways we accomplish this re-evaluation of the credit score is through a process known as a rapid rescore.
With a rapid rescore, we provide our credit reporting agency (a.k.a. reseller) with your pertinent documentation regarding an inaccurate tradeline. A tradeline is a single item reporting on the credit report itself, like a credit card. Our reseller, in turn, will use our most accurate, updated information to make necessary corrections to your report.
Let’s say your initial credit report has a Visa tradeline that shows a maxed-out balance and a very high payment. Because balance-to-limit can affect up to 30% of your overall FICO score, it could easily be the case that your score is being adversely impacted by inaccurate information. Second, an erroneous monthly payment being reported could be unnecessarily hampering your debt-to-income ratio and ability to qualify.
Now let’s also say you just received a bonus at work, paid off that credit card last week and want to document the current standing of the account. There is presently a zero balance and therefore no longer a balance-to-limit issue. Ideally, with a rapid rescore, within two to three days we could update the balance and payment, realize the improved score, and take advantage of the lower debt ratio. With the positive impact of these changes, a loan approval may be possible where the opportunity did not exist before. In addition, the resulting higher FICO score could get you a rate that is .25% better and will save you thousands over the term of the loan.
The main benefit of a rapid rescore is the quick turnaround time. Real estate transactions are bound by timelines built into contracts, and windows of opportunity (think interest rate fluctuations). After all, if time was not of the essence, you could accomplish the same goal under the guidelines of The Fair Credit Reporting Act (FCRA). Under this law, if the consumer disputes the accuracy of any information on file with a consumer reporting agency, the agency must conduct a reinvestigation at no charge and make any adjustments within 30 days. So in short, as a consumer, you already have the right to a free rescore, though its timing may not work with your plans. For this reason, we highly encourage our clients to begin the loan process very early. Identify any problematic credit items and work to address them via the free time window. When you do not have the luxury of time, the rapid rescore is a great tool in home finance that we can use to your benefit.
As with all things related to your credit report and the mortgage process, knowledge and understanding are the first requirements. Action can and should flow only from there. Let us know how we can assist you with your rapid rescore questions and needs today.