Rapid Rescore = $$$
I’ve written here derisively about so-called “credit repair.” I’ve derided “credit repair” because it’s a rip-off. But legitimate and often very worthwhile, a credit “rapid rescore” could save you thousands of dollars in interest expense over the course of a loan like a mortgage.
Quick Credit Report Review
You remember your credit report, that arcane document we personal finance bloggers are always urging you to obtain a free copy of annually to confirm its accuracy. It summarizes the good, the bad, and the ugly about your history of paying bills and debts over the past seven years. When you apply for a loan or other form of credit (like a credit card), your credit history, as documented in your credit report, is a key piece of information in determining approval and your interest rate. If you’re applying for a mortgage, a seemingly tiny interest rate difference adds up to huge dollars.
→ Finance $150,000 at 3.70% for 30 years and total interest paid = $98,553
→ Finance $150,000 at 3.95% for 30 years and total interest paid = $106,250
Difference in total interest = $7,697
You may differ, but even over 30 years, $7,697 strikes me as a lot. And a simple “rapid rescore” can help you capture this savings with little effort and cost.
“Credit Repair”—Just Say No!
Google returns 32 million results for a search of “credit repair”, and a big chunk of the links returned are attached to services claiming to remove negative information from your credit report so that the benefits outlined above are available to you. This gives me a chance to repeat one of the mantras here at Money Counselor:
There is no way permanently to remove negative, accurate information from a credit report.
If you want to learn why credit repair is a rip-off, read “Credit Repair: Always a Rip-Off”.
How Rapid Rescore Works
Your mortgage officer will have at her disposal a “what-if” tool. With this, she can determine the impact on your mortgage loan terms of changing specific data in your credit report.
For example, the mortgage officer may see that if you paid $3,000 toward credit card debt, your prospective mortgage rate would drop ¼ percentage points and save you a bundle. If you’ve got $3,000 (please don’t raid your emergency fund), you have the option of making the $3,000 payment and presenting proof to the loan officer of the new balance. Then, instead of waiting for the credit card company, she’ll send this new information directly to the credit reporting agency and ask for expedited processing. Typically your credit report will reflect the new credit card balance within three days. You’ve just saved a lot of money (not only on your mortgage but also future interest on the $3,000 in likely high-interest credit card debt you’ve been inspired to pay off).
But don’t discount a rapid rescore just because you don’t have the cash to pay down debt. Sometimes moving debt around—a credit card balance transfer, for example—can make a difference in your credit score.
And a rapid rescore isn’t just about saving money. Working with the mortgage officer on adjustments and expedited processing could make the difference in getting approved for a loan at all.
Legitimate Removal of Inaccurate Information
Here’s another scenario where rapid rescore can make a lot of sense: You’ve reviewed your credit report with your mortgage officer, and it shows negative, inaccurate information. Again, through a rapid rescore’s expedited processing, sending to the reporting agency proof that the negative information is inaccurate can get it removed from your credit report within a few days, boosting your credit score.
How Much Does Rapid Rescore Cost?
Given the clear benefits of rapid rescore, you’re probably thinking, “okay, what’s the catch?”
There is no catch, including cost. Though some banks may charge a modest fee for the service (~$30), under the Fair Credit Reporting Act, they’re not supposed to charge if the rescore is only about disputing and correcting inaccurate information. Rapid rescores are classified as an “expedited dispute process,” and the law prohibits a consumer fee for correcting an inaccurate credit report.
I suppose that if by making a big credit card payment, as in the example above, you made your credit report inaccurate (“obsolete” might be a more appropriate term), a mortgage lender could argue—and I could see the point, frankly—that a rapid rescore wouldn’t be about a dispute but rather a quick update. In this case, a fee might be legal, but paying $20-$40 is of course a no-brainer considering the benefits.
Have You Benefited From a Rapid Rescore?
Do you have experience with a rapid rescore? If so, what did you do to improve your credit report? Did you have to pay a fee to your mortgage lender?