You probably know that credit scores are a key component in getting approved for a mortgage. Yes, it’s all about that number! When buying a home, sometimes the credit score is not quite all it can be. So, the common questions basically revolve around how to increase the credit score. That is where a rapid rescore could help. Advantages of a rapid credit rescore include:
- Better interest rates
- Removing credit dispute language
- Updating balances for debt ratio
- Going from a manual underwrite to automated approval
Not all lenders offer this service, plus it is not always the solution. But in many cases, OVM Financial is able to use a rapid rescore simulator to determine chances of a quick increase in score. Therefore, a strategy is created to help a buyer qualify better.
How a Rapid Rescore Could Help You
Let’s say a buyer’s income and assets are sufficient enough to buy a home. BUT, the credit score is too low for the loan program. Just think, a buyer who is short on income could add another borrower. If a buyer is short on assets, there’s down payment assistance or a gift to save the day. Yet, each borrower needs to meet credit score requirements.
FHA Rapid Rescore Scenario
Sample Buyer has a 570 credit score, but needs a 620 score for an FHA loan approval. For instance, let’s say the loan officer has singled out the following credit card debts that could raise the score
- Credit card A – $450 balance | $500 credit limit
- Credit card B – $330 balance | $300 credit limit
– Remember that 30% of your credit score is balance compared to credit limits on revolving lines like credit cards!
A solution may look like the following: pay down each credit card balance under 30 – 50% of the credit limit. Even further, what if there is a recent late payment that is not correct? Now, we are talking about a potential serious points increase by paying down the cards and correcting a late payment.
It is very possible to bring this 570 to a 620, possibly even higher! Remember each credit report is different and there is not a guarantee of obtaining a certain credit score.
Rapid Rescore = Go from DENIAL to APPROVAL to HOMEOWNER!
How Long Does a Rapid Rescore Take?
On a normal credit bureau update, it could take a few days to potentially 30 – 45 days. If in the process of buying a home, this may be too long. Well, a credit rapid rescore could be completed in 5 business days or less. The credit rescore turnaround time depends on the following
- Credit vendors workload
- Each credit bureau turnaround time
- Creditor response time
- Documentation provided by borrower
First, the borrower must provide legible documentation providing specific proof for the requested change. Next, it depends on both the credit vendor and creditor turnaround. Basically, OVM’s credit vendor assures a 5 business day turnaround time.
What is a Credit Rescore Simulator?
This is a tool used by the mortgage loan originator to calculate approximate credit score changes based on certain activity. Basically, it is a “what if” scenario program which shows how one or more activities may affect a credit score. For instance, paying a credit card balance from $2000 to $50 may add 25 points to a credit score. Removing a collection or late payment could do the same or more. Conversely, some changes will negatively impact a credit score. So, using this tool is quite a weapon to help borrowers get the best qualification in a short time frame.
Is a Rapid Credit Rescore Always Needed?
Absolutely not. Actually credit rescoring can get expensive. For instance, a borrower may have paid down 8 credit cards and wants an update. At roughly $30 per trade line and per bureau, that adds up very quickly. If these cards report to all 3 bureaus, the price tag could be $720! Chances are, waiting rather than spending that kind of money is the better option. Yet, a quick update of one trade line for all 3 bureaus at $90 to save a purchase. All day long! An additional reason is a borrower may have time for the credit bureaus to update. Waiting may be best from a cost perspective. Furthermore, a change may not increase the score much. So, a rapid rescore is only necessary in certain cases where a quick correction must be made.