Credit tools can make big difference

Many mortgage applicants have never heard of “rapid rescoring” or CreditXpert score simulations — in part because some lenders choose not to educate them.

That’s unfortunate, because anyone who’s looking for the most favorable interest rates and terms in 2018’s rising interest-rate environment ought to know at least the basics about them — especially if their current score puts them near a break point for getting a better deal or even qualifying for a loan.

Here’s a quick primer: Say you spot an error in your credit reports — maybe an account you’ve paid off in full reported as open and delinquent, or a collection-account issue you’ve settled still reported as ongoing. Both potentially hurt your credit score a lot, but if you have documentation, you can show they’re out of date.

What to do? You could begin the standard process of getting them corrected by asking the creditors involved to request the national credit bureaus to amend your files. But here’s the problem: You’re under contract to buy a house and need the errors corrected immediately — or you risk not qualifying for the mortgage or interest rate you need.

Fixing the errors directly with the credit bureaus could take weeks.

Enter rapid rescoring — a process that frequently can get erroneous information corrected in as little as two or three days. You provide the documentation about the accounts to your loan officer, then the loan officer’s credit-report vendor. The vendor will then verify your documentation with the creditor involved and provide the corrected information directly to the credit bureaus.

The updates should show up quickly on your credit files, allowing the vendor to supply a new and more accurate report to your lender along with a new — and typically higher — credit score.

Paul Wohkittel of CIS Inc., a national creditreporting company, said he’s “seen scores that go up by 50 to 60 points,” saving applicants thousands of dollars in higher mortgage payments.

Terry Clemans, executive director of the National Consumer Reporting Association, a credit-industry trade group based in Roselle, Illinois, calls rapid rescoring “a great tool.”

But rapid rescoring is not for everyone. If the negative information depressing your score is accurate, it won’t help.

Then there’s the expense. Rescoring can cost $30 or more per updated account per credit bureau. So the total can be significant.

Plus, you as a consumer are not permitted to pay directly for rescoring. Your lender is required to foot the bill, though that might find its way into fees.

The expense is why some lenders are reluctant to raise the subject with applicants.

Here’s another mortgage credit tool you should know about. If your score isn’t quite what you need but the information in your files is accurate, your lender should be able to obtain a “what if” simulation through its credit vendor.

Using a proprietary model marketed by Baltimore-based CreditXpert Inc., the simulation can estimate credit score changes available to you if you take certain actions.

For example, the simulation might reveal that by paying down a specific credit card balance, you could improve your score by enough points to get a better deal.

Bottom line: Be aware of these options. When you apply for a mortgage, you’re not necessarily locked into your score.