Rapid Rescoring During Mortgage Process To Update Credit Report

This Article Is About Rapid Rescoring During Mortgage Process To Update Credit Report 

Rapid rescoring is a service used by mortgage lenders to update borrower’s recent credit updates in a matter of days instead of the normal cycle it takes.

  • If a consumer makes changes to their credit profile such as paying down the balance on credit cards, it may take up to 45 to 60 days to get it updated on the three credit reporting agencies
  • However, if a loan officer uses the services of rapid rescoring, it may only take three to five days or sometimes even sooner
  • Therefore, instead of waiting 45 to 60 days to get borrower’s credit scores updated through the normal billing cycle method, all information on consumer credit reports can be updated in a matter of days with rapid rescoring

Reason For Rapid Rescoring

What are the reasons for the quick reallocation of points

There are multiple reasons to rapid rescore borrowers during the mortgage process.

  • One of the main reasons to rapid rescore borrowers is because the borrower may not meet the minimum credit score requirements
  • Let’s take a case scenario situation
  • Borrowers need at least a 580 credit score to qualify for a 3.5% down payment FHA loan
  • Borrowers with under 580 FICO and down to a 500 credit score can qualify for an FHA loan
  • However, per HUD Agency Guidelines, borrowers with under 580 credit scores and down to 500 FICO need to put a 10% versus a 3.5% down payment
  • So, let’s assume the borrower has a 560 credit score and only has a 3.5% down payment on a home purchase
  • The loan officer does a FICO Simulator on the borrower and sees that by paying down three credit cards to a 10% utilizing ratio will increase the borrower’s credit scores by 20 points
  • A 20 point increase is what the borrower needs
  • The loan officer instructs the borrower to pay down the three credit cards and get documentation and proof by the credit card company
  • The loan officer and the mortgage processor can rapid rescore this transaction where the paydown of the credit card balance will be updated at all three credit bureaus
  • Once the credit bureaus update the borrower’s credit card balances, the loan officer can re-pull credit and the new credit score should be at 580 FICO
  • Now with the 580 credit score, the borrower can qualify for a 3.5% down payment home purchase FHA loan

This is one of the many reasons why rapid rescoring services are used by loan officers.

Reasons Loan Officers Use Rapid Rescore During Mortgage Process

This is why it is important for borrowers to prepare months ahead prior to qualifying and applying for a mortgage.

  • Credit scores can fluctuate every month
  • Having low credit card balances is the best method of increasing credit scores
  • For  maximum optimization, consumers should have a 10% or lower credit utilization ratio on all of their credit cards
  • However, even if you were to pay down your credit card balance, it will take 45 days or more for the updated balance to be reflected on your credit reports
  • This is why it is important to prepare for a mortgage months before applying and starting the mortgage process
  • Rapid rescores are used for accelerating the updated information quicker on consumer credit reports
  • It is not any form of credit repair

All rapid rescores need supporting documentation and proof.

Rapid Rescoring Updates On Credit Reports In Three To Five Business Days

How to Get Your Credit Report Updates Within Three to Five Business Days

Reasons, why rapid rescore, is used during the mortgage process is to report updated recent information on all three credit bureaus.

  • By improving the information and data on your credit reports, the consumer credit scores will increase
  • Higher credit scores mean lower mortgage rates
  • Many people are just a few points shy to qualify for a mortgage program
  • For example, if a person needs to go with a conventional loan, the minimum credit score requirement is 620 FICO
  • Paying down credit card balances can boost credit scores
  • Therefore, pay down your credit cards and the loan officer can do a rapid rescore
  • Within three to five days, the loan officer will re-pull credit and the borrower should have a 620 credit score
  • Other reasons loan officers do rapid rescores is to improve credit scores to get them the best rates on a refinance
  • Again, the loan officer can rescore borrowers after they have paid down their credit cards
  • Other reasons is when the borrower’s debt to income ratio is too high
  • Pay off certain debts like credit cards, installment loans, and/or car loans and the loan officer can do a rapid rescore

Rapid rescores are done to expedite removing and/or fixing errors on consumer credit reports.

Who Pays For Rapid Rescoring

Only mortgage lenders are allowed to do rapid rescore. Rapid rescores can be quite expense. It costs $35 per credit tradeline per credit bureau. So, let’s say for a case scenario example a borrower paid off the balance of an American Express credit card so now the balance is zero. To get this rapid rescore done, it is going to cost $105. $35 dollars per credit bureau. There are three credit bureaus. Therefore, it is $35 times three which yields $105. You can do the math where rapid rescores can easily add up. The lender pays for the rapid rescore. Depending on the mortgage banker and/or mortgage broker, the rapid rescore can be charged as a closing cost or in many cases the loan officer will pick up the tab of the rapid rescore. Remember, there is no free lunch in the mortgage industry. Many instances where mortgage bankers say they will pick up the rapid rescoring costs does not mean it was free. Mortgage bankers will account for the overhead costs such as rapid rescore fees on the mortgage rates they charge. The higher the costs that mortgage bankers cover on the back end, the higher the rates borrowers pay. This is just the way the mortgage industry works. If you have any questions concerning the contents of this article and/or other mortgage-related topics, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.

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