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If you plan to apply for a mortgage, your credit rating holds great importance. An error on your report or a large credit card balance might prevent you from qualifying for the loan. Such problems could also result in a significantly higher interest rate, even if they only cut your score by five or 10 points. The good news is that rapid rescoring has the potential to quickly boost your rating.

Major Advantages

Brokers and loan providers employ this technique to help borrowers gain access to credit. Rapid re-scoring works quickly enough that it may aid home buyers who have already scheduled closings. High credit scores hold even greater value than they did in the past. If you qualify to take out a mortgage, you’ll probably benefit from excellent interest rates.

Lenders have begun to use rapid rescoring quite often. It helps them acquire additional customers while giving borrowers access to more loans and better rates. If rescoring increases your score by 20 points, it might reduce a loan’s interest rate by 0.6 percent. This may not seem significant. Nonetheless, it would cut the total cost of a typical $150,000 mortgage by more than $18,000.

The Process

You may benefit from rapid rescoring in several different situations. For instance, perhaps you want a slightly higher score so that you’ll qualify for a desirable mortgage. A loan officer can use computer software to estimate how much your credit rating would change if you took certain steps, such as paying off a card, closing an account or correcting an error on your report.

If you decide to take any of these actions, you’d normally have to wait weeks or months for a credit bureau to update your score. Fortunately, rapid rescoring allows brokers and banks to immediately send new data to the credit agencies. These organizations can verify the changes and adjust your rating in just a few days.

Solutions

When you have a high credit card balance that hurts your score, a broker or lender may urge you to pay off this debt. Be sure to reduce the card’s balance to less than three-tenths of its limit. As the New York Department of Financial Services points out, people may also harm their scores by carrying too many cards.

After closing unnecessary accounts or paying off debt, provide the loan officer with documentation and request a rescore. This technique can also help you if a credit report contains harmful mistakes. When you contact a credit bureau and report an error, it may take as long as a month to fix the problem. Rapid rescoring shortens this waiting period by up to 90 percent.

Many different mistakes can hurt your score. If someone in your area has the same first and last names, creditors may inadvertently add information about this person to your report. Other inaccuracies appear due to data entry blunders, math errors or identity theft, according to the Consumer Financial Protection Bureau. You have a right to correct any false details.

Limitations

Although it offers great advantages for many borrowers, rapid rescoring doesn’t help everyone. You can’t use it to eliminate truthful data from a credit record. For example, perhaps an injury forced you to miss student loan payments in the past. You may explain this situation to the lender when you apply for a mortgage, but only the creditor can remove the negative data from your report.

Likewise, rapid rescoring doesn’t permit you to completely erase information about an overdue balance by paying it off. Many borrowers believe that this will banish negative facts from their credit reports. A late payment doesn’t harm your score as much as an unpaid bill, but you probably won’t succeed in deleting details about your lateness. Such information normally disappears after a maximum of seven years.

Any Fees?

Homebuyers should avoid conducting business with companies that offer rapid rescoring as a separate service. A lending institution or broker ought to handle this process. It costs around $30 to submit new data and update a person’s score. Some banks and brokers will charge you for a rescore. However, federal law prohibits fees associated with correcting errors on credit reports.

Rapid rescoring isn’t a silver bullet, but it helps mortgage borrowers in a variety of circumstances. Remember to ask about this solution if a loan officer states that you need a better score to qualify for a mortgage or obtain a low rate. You can also benefit from reviewing your credit history and account balances before applying for any loan.