When you apply for a loan, a credit card or any other form of credit, every point in your credit score counts. So, you may want to consider boosting your credit score before applying for any type of credit as even a few points added can make a large difference. With a higher credit score, you can save on fees, annual percentage rates, higher bonuses, and perks. There are many things that you can do to improve your credit core over time, but credit bureaus often do not make the relevant adjustments for several months. So if you do not have the time to wait for creditors and credit reporting agencies to update your scores, especially if your credit score is just below the range to qualify for a large loan like a mortgage you can consider rapid rescoring.
What is Rapid Rescoring?
Rapid rescoring is a service offered by some lenders, including banks and credit unions to make updates to your credit reports. The goal is to improve and update the information in your credit reports considerably quicker than if you were to work directly with the credit bureaus. Normally it takes 30-60 days but with rapid rescoring, you can update your credit within 3-5 days. By reflecting the most recent positive information your credit score will increase to meet the time-sensitive aspects of a low-cost loan.
How it can help you?
A rapid rescore is best used when your credit score is within a few points of qualifying for a large loan, credit card or any form of credit. It will ensure that your entire credit profile is completely updated and ready for any loan application process. Your updated credit score will also result in a significant difference in the interest rate available to you. The rapid rescoring process is fairly predictable as lenders generally use simulator beforehand to see how the update would affect your credit score. According to Adam Carroll, Chief Education Officer at National Financial Educators, “A 0.5%-1% difference in interest rate may not seem much when you are not looking at long term costs. But, every single percentage that you can decrease means massive amounts in savings later on.” For example, say your current credit score will get you a 4.75% interest rate on a typical 30-year fixed-rate loan of $250,000 and after rapid rescoring, your new credit score qualifies you a 4.25% rate. Then this can help you save you $74 a month or $26,737 over the life of your loan. You can use online calculators to calculate the exact difference in your case.
When it may not work
A rapid rescore does not raise your credit score alone but rather updates your current credit profile. So, it will not work if have recently missed a credit card payment, closed out a line of credit, had a raise in hard inquiries, or any other form of negative entry.
Rapid rescoring will also not work if the reporting creditor does not acknowledge the item in question is a mistake. For example, if you dispute a late payment and the creditor has no record of timely payment or you cannot prove it then the lender will not even attempt a rapid rescore.
It isn’t Magic
To succeed with rapid rescoring you need to participate in the process. For example, if you are late on payments you will have to pay up and get it to your lender before you order an updated credit score. Likewise, you would also collect the documentation to prove that the accounts were paid up. This takes time and effort and you cannot depend on your lender to do all the work.
Are there fees involved?
Rapid rescoring is a service provided by your lender or mortgage broker and typically you do not have to pay a separate fee for the service under the federal law (FCRA). But nothing comes for free, so sometimes there may be a small fee involved in using the service or even if they do not charge you will be paying for your lender’s capabilities in the interest rate and closing costs that you pay. However, in the long run, this service can save you much more money than what you pay.
Would it not be better to have one less thing to worry about when you are in the middle of a stressful and complicated transaction? Rapid rescoring does help fix inaccuracies quickly. But ideally, if you check your credit reports regularly, fix errors and keep your credit card balances low you will have nothing to fix the next time you apply for a live