Picture the following scenario: You apply for a mortgage loan but when the mortgage broker pulls your three credit reports, you learn that your credit scores are not quite high enough to qualify for the loan with the best terms. Before you have time to panic, the mortgage broker tells you that he or she may have a solution that could help you. The solution is called rapid rescoring.
What Is Rapid Rescoring?
The term "rapid rescoring" is misleading. The process actually has nothing to do with rescoring anything, either slowly or “rapidly.” Instead, rapid rescoring refers to a mortgage broker's ability to get the information on your credit report updated and/or corrected in a very short period of time, typically as little as 48 to 72 hours.
Once the credit report modifications are made, the mortgage broker can then re-pull new credit reports and hopefully your newly calculated credit scores are high enough to qualify for the desired mortgage and rate. The process should actually be called rapid update rather than rapid rescoring, but I didn’t come up with the name.
How Do You Know Which Accounts to Modify?
The goal of rapid rescoring is to help you obtain higher credit scores in a short period of time so that you can qualify for your desired mortgage and interest rate. For rapid rescoring to be effective, your mortgage broker must first be able to ascertain which credit report modifications might benefit your credit scores.
Credit scoring is complicated. It can be difficult to determine which actions you need to take to facilitate a higher credit score. As a result, many mortgage brokers pay fees that allow them to access certain score optimization services in hopes that whatever modifications they make are going to be fruitful and not just a waste of time and money, as rapid rescoring isn’t free.
For rapid rescoring to be effective, your mortgage broker must first be able to ascertain which credit report modifications might benefit your credit scores.
Score optimization services, such as "Score Wizard" or "CreditXpert," are designed to analyze the information on your credit reports and determine the best ways to boost your credit scores quickly. If your mortgage broker runs your reports through one of these software programs, he or she might come back with suggestions, such as paying down your credit card balances or paying off other accounts. If you have proof that a negative item on your credit reports is incorrect, such items may be eligible for rapid rescoring as well, but in the form of a correction or perhaps a deletion.
The Darker Side of Rapid Rescoring
Score optimization and rapid rescoring services are generally positioned as services that are beneficial to home buyers and, to be fair, that is partially accurate. After all, if you need a 640 score to qualify for the mortgage loan but your score is currently a 625, even a simple 15-point credit score increase could be meaningful. However, another reason that mortgage brokers are willing to subscribe to these services is because it enables them to earn more commissions on approved mortgages. In fact, the marketing tagline for one of these services is “Capture every loan opportunity.” Mortgage brokers don’t get paid unless you close on a mortgage loan, similar to how a car salesman doesn’t get paid unless you buy a car.
The challenge, especially for the credit bureaus, is striking a balance between accurate information and the integrity of their dispute/resolution processes. In the normal “non-mortgage” environment, it can take up to 30 days to have information corrected because the credit bureaus communicate directly with the furnisher of the allegedly incorrect information. And while that may seem slow, there’s no cost to have your reports corrected. Rapid rescoring, on the other hand, can become extremely expensive and, frankly, all you’re doing is paying for expedited resolution.