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Apr 27, 2005

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].
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Apr 27, 2005
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