What Is a Rapid Rescore?

Mortgage Broker Advisors Podcast

Mortgage lenders may request a rapid rescore to have new payment information added to your credit reports quickly. This may result in a potential increase to your credit score, possibly improving your loan eligibility.

When you apply for a home loan, your mortgage lender may require you to pay off any past-due debts or outstanding loans before approving your loan application. Rapid rescoring is a process lenders use to have new payment information added to your credit reports quickly—potentially increasing your credit score and improving your loan eligibility.

How Rapid Rescore Works

With a rapid rescore, a mortgage lender pays a fee to the credit reporting company (Experian, TransUnion or Equifax) to have recent account changes updated to a loan applicant's credit report in an expedited time frame.

Normally, after you make the necessary payments to pay down or pay off an account as requested by your mortgage lender, it may take a full billing cycle or two for your creditors to process those payments and report the information to the credit reporting agencies. Only credit scores calculated after the updates have been made to your credit report will reflect the changes to your accounts.

Because mortgage loans are often time-sensitive, a mortgage lender may prefer to pay a fee to have an applicant's payment information updated more quickly. The lender submits proof of the recent payment updates, such as paying off or paying down debt accounts, to the credit reporting agency so the new information can be updated more quickly and help expedite the lender's mortgage approval process.

Once the credit report is updated, the lender can request a new credit score that will reflect those updates and ideally result in a higher score. This service is offered only through your lender—you cannot request a rapid rescore on your own.

How Long Does Rapid Rescoring Take?

How long a rapid rescore takes can depend on your mortgage lender and other creditors.

Once you have made payments to your credit accounts, those creditors will first need to update the accounts to reflect the new balance or payment status. Next, your mortgage lender will need to obtain proof of the changes from you so they can provide the updated information to the credit reporting company.

Once the mortgage lender begins the rapid rescore process with the credit reporting agency and submits the necessary documentation, it is often completed within two to three days.

Is a Rapid Rescore Something I Should Consider?

A rapid rescore is usually recommended by your mortgage lender when your current credit score falls a few points below the score needed to qualify for a better rate or loan terms. Even a small change of a fraction of a percentage point in your mortgage interest rate can save you thousands of dollars over the life of the loan.

If you have a current credit score that is relatively close to the score the bank says you need, and the means to pay down your debts, it may make sense to ask your lender to take advantage of a rapid rescore option to save money on interest and fees.

It's important to keep in mind that paying off or paying down an account may not always result in a credit score increase. There are many different factors that go into a credit score calculation, and each individual's credit situation is unique.

For example, if a high utilization rate is one of the more significant factors impacting your scores, paying down a large credit card balance has the potential to increase your scores right away. However, if your utilization rate is already relatively low or the payment you made doesn't significantly change your balance-to-limit ratio, you may not see a change to your scores once the balance is updated.

Similarly, while paying off debt is always a good thing, any major change to your credit history, such as paying off an installment loan, may result in a temporary dip in scores until your credit history has stabilized.

The Bottom Line

It's important to remember that your credit reports are continuously changing as lenders report updates to your accounts. In the time it takes for the rapid rescore process, there may be other changes or updates to your credit history that can also cause credit scores to fluctuate.

What is FICO 8 and Who Uses It?

FICO 8 is the most commonly used version of the FICO model. Like previous versions, it takes on-time payments, account balances, and other credit history into account when calculating your score. However, the FICO 8 model has a few features that you should be aware of before applying for credit.

FICO Model

Description

FICO 9

Newest version. Not widely used.

FICO 8

Most common. Used for Auto and Bankcard lending.

FICO 5

Used by mortgage lenders. Built on data from Equifax.

FICO 4

Used by mortgage lenders. Built on data from TransUnion.

FICO 2

Used by mortgage lenders. Built on data from Experian.

One of the most important aspects about FICO 8 is that it’s more sensitive to high utilization of credit lines when compared to previous versions of FICO. We recommend that you stay under 30% credit utilization to keep your FICO 8 score from dropping due to high utilization.

On the other hand, FICO 8 has positive changes for consumers as well. Accounts in collections with balances under $100 are now ignored by your FICO score. Previously, all collections accounts were factored into your FICO score, no matter how small they were. Additionally, FICO 8 is more forgiving to one-off late payments of 30 days or more when compared to previous versions of the FICO model as long as all other accounts are in good standing.

There are two sub-versions of the FICO 8 score: FICO 8 Auto and FICO 8 Bankcard. As you’d expect, lenders use FICO 8 Auto to assess creditworthiness for auto loans and FICO 8 Bankcard to assess creditworthiness for new credit card accounts.

These specialized versions of the FICO 8 scoring model are similar to standard FICO 8, but with emphasis on a different part of your credit history. For example, FICO 8 Bankcard places a bigger emphasis on your behavior with credit cards than FICO 8 Auto. Despite these differences, your FICO 8 Auto and Bankcard scores will be largely similar to your standard FICO 8 score.

FICO 8 vs FICO 9: What Are the Differences?

FICO 9 is similar to FICO 8 but differs when it comes to collections and rent payments. FICO 9 counts medical collections less harshly than other accounts in collections, so a surgery bill in collections will have less of an impact on your credit score than a credit card bill in collections.

Additionally, FICO 9 ignores accounts in collections that have a zero dollar balance. If you had a credit card account go to collections but later paid it off, FICO 9 will no longer use said collections account against your score. This is different than FICO 8, which factors all collections amounts of $100 or more into your FICO score—even if they’re completely paid off.

Just because collections with a zero balance are ignored by FICO 9 does not mean that lenders will ignore them. Credit bureaus will still show these collections on your full credit report, and lenders will see them when they reviews your full credit history.

Finally, FICO 9 factors rental history into your credit score. This makes it easier for people with no credit to build a high credit score with their monthly on-time rent payments. Unfortunately, this is dependent on your landlord actually reporting rent payments to credit bureaus—something not yet seen on a large scale.

Most lenders have yet to adopt FICO 9 since it’s still new to the market. This will change as time goes on, so start monitoring your FICO 9 score now to ensure you don't encounter any surprises as the years go on. You can pay to view your official FICO 9 score on FICO’s official credit monitoring service. Unfortunately, there is no one offering a free FICO 9 score at this time.

What Are Older FICO Models?

FICO 8 and 9 aren’t the only versions in use. Some lenders and industries use older versions like FICO 2, 4, and 5. In fact, these are still used by the mortgage industry when assessing creditworthiness for new mortgages and deciding on interest rates.

FICO 2, 4, and 5 are very similar. The main differences between the three is that 2, 4,and 5 use data from Experian, TransUnion, and Equifax respectively. Mortgage lenders pull one of each and compile the reports in a document called a Residential Mortgage Credit Report. Duplicate data is screened and removed, and the middle score of the three is picked to represent your worthiness to pay back the mortgage.

FICO 8 and 9 use data from a single credit bureau, so using FICO 2, 4, and 5 together gives mortgage lenders a more complete view of your creditworthiness because they can see the history of every account you’ve opened. This is especially helpful for mortgage lenders as many creditors don't report account history to all three credit bureaus.

How Does FICO Differ from Other Credit Score Models?

VantageScore is another popular credit scoring model. Like FICO, VantageScore 3.0 grades credit on a 300 to 850 point scale and takes credit utilization, credit inquiries, and on-time payments into account. However, the two models differ in a few ways, with one major difference. FICO penalizes all late payments the same way, while VantageScore penalizes late mortgage payments higher than other late payments.

FICO and VantageScore also differ in how they handle combining similar credit inquiries. With FICO, you have a 45 day grace period where similar credit inquiries for auto loans, mortgages, and student loans are combined into one inquiry. VantageScore gives you a smaller 14 day grace period, which can make comparison shopping for loans harder.

Home equity has proven to be one of the strongest ways for families to build and pass on intergenerational wealth and MKG Enterprises Corp Mortgage Brokerage NLMS 1370394 is committed to guiding clients through the mortgage process while promoting equal and fair access to homeownership.

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