Small changes in your credit scores can make a big difference in the mortgage interest rate you end up paying. That’s why some lenders offer something called a “rapid rescore.”
Find out how a rapid rescore works and what it could potentially do for you.
Let’s Start with the Basics
Before we dive into rapid rescoring, there are a few facts about credit that may be helpful to know.
There are three primary Credit Reporting Agencies (CRAs) –– TransUnion, Equifax, and Experian. The CRAs receive information from lenders and creditors (also known as “data furnishers”) which they use to compile a credit report. Data furnishers are not required to report to all (or any) CRA, so the information they each have could potentially be different. This means you should have a separate credit report from the CRAs, each of which may contain different information .
Your credit scores — yes, you have more than one — are calculated using the information from your credit reports. And, as you may have experienced, credit scores can determine credit eligibility, interest rates, and more.
Now, since CRAs rely on data furnishers to provide them with information (like your current balance, payment history, etc.), seeing an improvement in your credit score can take some time. That’s because they aren’t necessarily furnishing data every day.
How Often Do Credit Reports Update?
Unfortunately there isn’t a firm answer to this question.
Data furnishers are generally free to provide updated information to CRAs on their own schedule. So while it usually happens around every 30 days, it could potentially occur more or less depending on the data furnisher. Also, data furnishers who do report to multiple CRAs may not do so on the same day, which could mean one credit report and score could be different than the next.
However, once the CRA receives information from the data furnisher, your credit report and credit score are usually updated right away.
The Difference a Score Can Make
Often the range your credit score falls into can be more important than the score itself. That’s because these ranges are frequently used to determine which interest rates and loan terms are offered to whom.
Let’s consider this example using the calculator at MyFICO.com:
Mortgage amount: $500,000
Loan term: 30-year fixed
The difference in monthly payments may be small from one credit score range to the next, but the overall savings in interest is considerable.
Rapid Rescoring: How It Works
So what happens if you’re in the middle of the mortgage approval process and you’re on the cusp between one credit score range and another. You know you have the means to, say, pay down the balance on your credit card –– a move that could potentially put you into a higher credit score range with potentially better loan terms –– but you don’t have the time to wait for your score to adjust.
This is where rapid rescoring may be able to help.
Who can do a rapid rescore?
A rapid rescore is a service some lenders typically offer to prospective homebuyers to quickly update their credit report –– and potentially boost their credit score –– with positive credit information. In other words, you likely need to be in the market for a home loan or looking to refinance your current home loan and have a lender that offers this service.
The reason why it’s primarily reserved for home loans is because of the time-sensitive nature of the transaction and the potential money-saving benefits of a lower interest rate on a large mortgage.
Who is eligible?
Your lender may be able to run a credit simulation to determine if taking specific actions –– like paying down a credit card balance or having inaccurate account information removed –– will give your credit score enough of a boost to make a difference in the loan terms they can offer. There is always a possibility a rapid rescore may not provide enough of a change to make it worth the cost.
According to NerdWallet, if you are hoping to use a rapid rescore to clear negative information from your credit file, you will probably also need proof that it’s incorrect or inaccurate.
What can be addressed with a rapid rescore?
One way to determine if a rapid rescore is a viable choice for your situation is to consider what may and likely can’t be addressed this way. Here are some things that can potentially be changed:
- High credit utilization
If your credit utilization –– the amount of credit you’ve used on revolving credit accounts (like credit cards) vs. your total revolving credit limit –– is above 30%, this could be negatively impacting your credit score. Paying down these balances, and getting a rapid rescore to quickly reflect the change, could give your credit score a boost.
- Account errors
It’s possible your credit report contains incorrect or inaccurate information that is dragging down your credit score –– like collection accounts that should have been removed, late payments that weren’t actually late, or accounts you never opened. By gathering documentation proving this information isn’t correct, you may be able to have it removed or adjusted with a rapid rescore.
And what generally cannot be changed:
- Negative (but accurate) information
Since your lender will likely need proof that certain information is incorrect before moving forward with a rapid rescore, the process is not for removing accurate information just because it’s negative.
What’s the cost?
Under the Fair Credit Reporting Act if a CRA is properly alerted to a potential error on a consumer’s credit report (either by the consumer or an entity on the consumer’s behalf), they are required to investigate at no charge to the consumer. This generally means lenders are not able to charge you directly for this service, although they could potentially roll it into other costs.
The cost to the lender can be between $25-$40 per account, per CRA. So, for instance, if you have two accounts with errors and they need to be corrected with all three CRAs, that could be $150-$240.
How does it work?
Generally your lender will pull your credit report and determine what factors could be weighing down your credit score. They may then use a credit simulator to determine how much certain changes might improve your score. From there you may pay down balances or speak to specific creditors about information you believe was added to your credit report in error. If the creditor confirms the information is incorrect, they will usually provide documentation you can hand over to your lender.
From there, your lender should provide the required documentation to the CRA(s) reporting the information and request the rapid rescore.
How long does it take?
According to TransUnion, a rapid rescore can take “a few days.” Experian offers a rapid rescore service called Express Request which they say takes “1-2 business days.” Equifax offers the same service, called Expedited Consumer Dispute, with results typically in “under 72 hours.”
The Bottom Line
If your credit score places you at the tipping point for better home loan terms and there are steps you can take today to see an improvement, a rapid rescore may be a good option. And, of course, under different circumstances –– when time isn’t an issue –– there are plenty of ways to improve your credit standing.
Sign up for Upturn for free here, view your TransUnion credit report, and we’ll submit any disputes on your behalf. It’s that easy.