Rapid re-scoring vs. credit restorationSherene Costanzocredit restoration, debt management, credit scores
Many people do not understand the difference between rapid
re-scoring and credit restoration. Both services can boost a
clients credit score or help close a loan, but there are several
differences as well. Rapid re-scoring can be a fast and effective
way to correct errors and omissions on a clients credit report
within as little as 72 hours. The process has positives and
negatives; not every client is a good candidate for the service and
some may want to consider credit restoration services instead.
Credit restoration can take 30 days to show results, but it can
also be a helpful alternative for those who dont have the proof for
rapid re-scoring.
Rapid re-scoring
Rapid re-scoring is a process that makes corrections to a persons
credit report within as little as 72 hours. It can take as long as
two weeks, but many times this is still fast enough to close a loan
that may have otherwise fallen through. Companies that provide
rapid re-scoring work directly with lenders and brokers in order to
assist the borrower. These companies also work closely with the
three major credit bureaus to make corrections quickly. Many of
these companies provide other credit reporting services to the
broker and lenders, such as tri-merger credit reports.
Credit restoration
Credit restoration companies rely on the Fair Credit Reporting Act
(FCRA) to assist consumers in increasing their credit scores. The
FCRA provides that the consumer has the right to question any
unverifiable, inaccurate or erroneous information reported in their
credit file with any of the three major credit bureaus. This
information includes reporting about collections, late payments,
charge-offs, judgments, tax liens, foreclosures, garnishments and
bankruptcies. Once the credit bureaus are notified of a disputed
item on a consumers report, they have 30 days from the date they
are notified of a dispute to verify the item(s) in question with
the original creditor. If the original creditor does not verify the
account within that time, the delinquent account or late payment
must be corrected or deleted from the credit file. At this point,
the score will adjust immediately with the three major credit
bureaus.
Although some consumers choose to dispute and work toward
correcting inaccurate information on their own, the process can be
very confusing and time-consuming. Credit restoration companies
present another convenient option, similar to hiring an accountant
instead of filing your own taxes. In addition to communicating with
the bureaus regarding disputed items, some companies also consult
with clients about how to obtain and maintain good credit. Also,
some companies may help consumers settle accounts that are not
removed during the process.
How effective are these processes?
In some cases, rapid re-scoring can work magic. However, there are
some stipulations and downfalls. The process may not help in every
case. The catch to rapid re-scoring is that the borrower must have
proof, usually in writing, from the creditor, to send over to the
re-scoring company. The re-scoring company will then turn it over
to the bureaus. At this point, the bureaus will make the correction
to the report. The bureaus have specific departments that handle
rapid re-scoring, so corrections can be made in a timely manner. In
certain cases, credit restoration can delete the credit history of
the negative item, while rapid re-scoring will only mark the status
as paid. A paid status on a charge-off or collection account does
not erase the negative history from the credit report. The only
benefit is that the collection is satisfied and the score may
increase by a few points. The paid collection will report for seven
years. If you are only looking to satisfy the collection for
underwriting purposes, re-scoring will work for you. If you really
need a score boost, you may want to consider credit restoration.
Credit restoration focuses on removing the entire negative history
of the account. If the entire history of the collection account is
deleted, the score is more likely to increase and by several more
points.
Stipulations and downfalls
Rapid re-scoring requires proof, which is provided from the
creditor. Therefore, if an item is in dispute with the creditor,
you will not have proof of an error. In most cases, the client
should have a letter from the creditor, admitting that the account
is being reported incorrectly. Some re-scoring companies may call
the creditor and request the necessary documents. In many cases,
borrowers do not have any proof and therefore cannot use the rapid
re-scoring process. Obviously, if proof is required, you will not
be able to remove any true negative items through rapid
re-scoring.
In addition, the services can be costly depending upon the
number of errors found. On average, you should expect to pay
approximately $100 for each error to be corrected with all three
credit bureaus. The average cost of credit restoration ranges
between $350-$450. Finally, there is no guarantee that the score
will increase. If proof is provided, the error must be corrected.
However, this does not guarantee any change in the credit score. So
much is unknown about the calculation of credit scores, which makes
it nearly impossible to predict a change in the score. However,
manipulating the factors of the score can have a positive
influence.
Rapid re-scoring and credit restoration are both useful tools
for correcting credit reports and increasing scores. Rapid
re-scoring can be useful if a broker gets caught in a bind and
needs a quick fix when financing a client. Many times, it can make
the difference between losing a deal due to erroneous information
on the credit report, or qualifying an individual for a loan. If
you have several items to remove, credit restoration can be easier
and less expensive than rapid re-scoring, but it does not provide
such quick results. Consider both options and decide which service
will best fit your clients needs. Sometimes, a client may even
benefit from using both rapid re-scoring and credit restoration for
maximum results. The key for lenders and brokers is using these
tools to overcome the obstacles that prevent you from closing the
deal.
Sherene Costanzo is vice president of Credit Consultants
Inc. She can be reached at (888) 522-7007 or e-mail
[email protected].
