You were dreaming of a house with a flower garden and a picket fence, but you got a rude awakening when you saw your credit score.
If an error on your credit report or the high balances on your credit cards could endanger your home financing plans, you might get help from a little-known credit tool: rapid rescoring.
Rapid rescoring is a legitimate way of quickly increasing a credit score that makes it possible for some consumers to purchase a home or score a better interest rate, says Anthony Piccone, resident of 7th Level Mortgage, a New Jersey mortgage lender.
Consumers looking at rapid rescoring typically don’t have months to nurture their credit score into better shape, says Julie Marie McDonough (aka The Credit Lady), author of “How to Make your Credit Score Soar.” With rapid rescoring, the process gets done in days.
“When you’re buying a house, timing is key,” she says.
How rapid rescoring works
Rapid rescoring is most commonly used in two scenarios, when a homebuyer either:
- Can’t qualify for a mortgage because their credit score is too low
- Would get a lower interest rate on a home loan if they had a higher score
In those situations, a mortgage broker or lender can use a credit score simulator tool that evaluates the consumer’s credit and generates a report that lists any specific, legitimate actions the consumer could take to increase their score. The tool also simulates how those actions would affect the score.
The broker or lender might charge a small fee to do the simulation. For example, at 7th Level, it costs $15, Piccone says.
Depending on the results, the consumer can decide whether or not it makes sense to move forward with rapid rescoring. If the homebuyer decides to proceed, Piccone says, they would need to take the prescribed actions. Typically, these might include:
- 1. Paying down or paying off a credit card balance that is weighing down their score due to your utilization ratio, the total amount of credit used, which makes up 30 percent of a consumer’s FICO score, McDonough says.
- 2. Shifting debt from one credit card to another to keep usage below 50 percent of the credit limit on each card the consumer has, Piccone says.
- 3. Providing evidence of a credit report error such as a collection for an item already paid or an account that belongs to someone else but is showing on the consumer’s credit reports.
After the consumer takes the necessary steps, the mortgage broker or lender will fill out a rapid rescoring form and submit it to the three major credit bureaus, McDonough says.
Normally it can take 60, 90 or even 120 days for changes to show up on a credit report, but rapid rescoring typically gets the reports and the score updated in about three to five business days, Piccone says.
The cost of a rapid rescore sometimes is paid for by the consumer and sometimes by the lender. The price is charged per item, varies based on what is being corrected and could run $150 to $175 per change, McDonough says.
“It can get expensive,” Piccone says.
When rapid rescoring is not an option
Rapid rescoring isn’t for everyone, and it can’t be used to increase a credit score that is low due to legitimate negative items on the credit report.
In some cases, an analysis of a consumer’s credit will find that rapid rescoring is not an option because there’s no specific action they can take that would help their score immediately, Piccone says.
That usually happens in scenarios with a prospective homebuyer who has no credit cards or other revolving credit and a score that is being dragged down by legitimate negatives like collections, late payments and judgments. These items will stay on the credit report until they fall off on their own. The timing varies by the type of item, but typically takes seven years.
It’s important to know that rapid rescoring is not credit repair, Piccone says. Credit repair uses an array of possibly shady tactics to try to get accurate negative items removed from a consumer’s credit report.
“When we do a rapid rescore, we’re doing it for a legitimate credit purpose that fairly reflects the borrower’s true creditworthiness,” he says.
How rapid rescoring affects your credit
The effects of rapid rescoring depend largely on the individual situation.
The biggest increase McDonough has ever seen was 101 points, she says. Most consumers won’t see that large a jump, but she has seen an action as simple as paying down one maxed-out credit card with a $1,000 credit limit up a score by 20 to 30 points, she says.
Even if rescoring would up your score by only a handful of points, it could be worth doing if that increase would nudge you into a higher credit bracket and offer you substantial interest rate savings.
How much could you save? It depends on your situation, but McDonough worked with a couple who, through rapid rescoring, reduced their interest rate enough to cut $95 a month off their payment on a mortgage refinance. Over the life of their 30-year mortgage, that will save them tens of thousands of dollars, she says.
If you’re interested in rapid rescoring, it’s important to work with a qualified mortgage broker or lender who can guide you through the process, McDonough says.
By going that route, you can avoid online credit repair scammers and reduce your chances of making a rapid rescoring mistake like closing credit cards or paying off an old collection account that might actually hurt your score.
There are no guarantees, but for some consumers, rapid rescoring can offer the key to a new home.