What is a quick rescore?
Your credit score plays a crucial role in determining your chances of getting approved for a mortgage, credit card, or other type of debt. To improve your credit score, it's essential to pay your bills on time and keep your debt levels low. However, if you're close to being approved or denied, a rapid rescore can help.
A rapid rescore can promptly reflect positive credit activity on your report. CNBC Select offers comprehensive information on how rapid rescores work and when they are appropriate.
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How a rapid rescore works
Lenders offer a service called rapid rescore, which can help increase your credit score in specific circumstances. This can improve your chances of getting approved for a mortgage or securing a better rate.
While borrowers may have to pay between $25 to $40 for rapid rescores, lenders cover these fees, making them free for borrowers.
Your credit score is determined by the data on your credit report from one or more of the three major credit bureaus (Experian, Equifax, TransUnion). When you pay a bill or open an account, the information doesn't immediately reflect on your credit report. Credit reports are typically updated at least once a month, and your credit score is updated in a similar timeframe.
If you pay off a credit card or other balance just before applying for a mortgage, your credit score may not reflect that activity. However, a rapid rescore can typically update your credit score in three to five business days.
Determining whether a rapid rescore is necessary depends on changes on your credit report or the ability to quickly make those changes. Focusing on paying down revolving debt is a good first step. According to John Ulzheimer, a credit expert, paying down revolving debt can almost guarantee an increase in your credit score or at least maintain it. Additionally, identifying and correcting errors on your credit report can quickly reflect the change in your credit score.
To avoid any issues with a mortgage application, it is recommended to review your credit history and correct errors beforehand. A credit monitoring service, such as Experian IdentityWorks℠ (3-bureau monitoring with paid plans), can assist you in keeping track of all three credit bureaus' activity.
What rapid rescore doesn't do
A quick update to your credit report won't erase or offset your history of late payments or bankruptcy. According to Ulzheimer, it's not credit repair.
A recent missed payment or a closed line of credit could negatively impact your credit score with a rapid rescore. Even if your credit score is increased, that increase may not have a tangible impact on your mortgage rate or application. Therefore, it makes the most sense if you're on the edge of qualifying for a mortgage or a better interest rate.
Other ways to improve your credit score
The most effective method for enhancing your credit score is to consistently make timely and full payments on your bills. Not all bills you settle are reported to the credit bureaus. Specifically, revolving accounts (credit cards, etc.) and installment loans (student loans, mortgages, personal loans, etc.) are reported to the credit bureaus and can contribute to the development of your credit history if you pay them on schedule. Thus, the nature of the bill you pay is crucial.
One way to improve your credit report if you have poor or no credit is to apply for a secured credit card. Secured cards, like the Discover it® Secured Credit Card, are easy to obtain because you must make an initial deposit to qualify. After obtaining the account, you can improve your credit by consistently paying the full balance each month before the due date.
Some services, such as Experian Boost® and eCredable Lift®, allow you to add payment history for utilities, streaming services, and other bills to your credit report. However, there are limitations, and mortgage lenders may not consider credit scores affected by these services.
Both Experian Boost and eCredable Lift can impact your credit reports, but it's important to be mindful of how you utilize them. While Experian Boost only adds positive information, eCredable Lift can include both positive and negative information in your credit history.
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Bottom line
Some lenders provide a service called rapid rescore, which can increase your mortgage approval chances by recalculating your credit score. Nevertheless, it may not always be advantageous, so it's crucial to consult with your lender about its relevance to your specific circumstances.
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Not all lenders use Experian credit files or scores, and some may not see improved scores or approval odds.
To learn about the rates and fees for the Discover it® Secured Credit Card, please visit this link.
