How effective is credit rescoring?Sherene Costanzocredit restoration, rapid rescoring
Rapid rescoring and credit restoration are credit score
improvement services that can be quick and effective when trying to
find a loan for your clients with poor credit. Many people do not
quite understand the difference between rapid rescoring and credit
restoration. Both services can boost a client's credit score or
help close a loan, but there are several differences between them.
Rapid rescoring can be a fast and effective way to correct errors
and omissions on a client's credit report within as little as 72
hours, but it can be quite expensive. The process does have
positives and negatives, and not every client is a good candidate
for the service and may want to consider credit restoration
services as an alternative. Credit restoration may show results in
as little as 30 days and may help those who don't have the proof to
go through rapid rescoring.
What is rapid rescoring and who provides the
service?
Rapid rescoring is a process that makes corrections to a person's
credit report within as little as 72 hours. It may 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 rescoring 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 also provide other credit reporting services to the
broker and lenders, such as tri-merged credit reports.
What is 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 his
credit file with any of the three major credit bureaus. This
information may include 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 consumer's report, they have 30 days from the date they
are notified of a dispute to verify the item 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. Credit restoration can be very effective and affordable.
Although consumers can and frequently do 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, just as people can
file their own taxes but may choose to pay an accountant to provide
the service. In addition to communicating with the bureaus
regarding the disputed items, some credit restoration companies
also consult with clients on 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 rescoring can work magic; however, there are
some stipulations and pitfalls. The process may not help in every
case. The catch to rapid rescoring is that the borrower must have
proof, usually in writing, from the creditor to send over to the
rescoring company. The rescoring company will then turn it over to
the bureaus. At this point, the bureaus will make the correction to
the report and the score adjusts. The bureaus have specific
departments that handle rapid rescoring so that corrections can be
made in a timely manner. In certain cases, credit restoration can
delete the credit history of the negative item, where rapid
rescoring will only mark the status 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,
rescoring 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 through the credit restoration
process, the score is likely to increase by several more points.
Rapid rescoring requires proof, which is provided by 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 rescoring companies may call the
creditor and request the necessary documents. In many cases, the
borrowers do not have any proof and therefore cannot use the rapid
rescoring process, which would then steer them toward credit
restoration. Obviously, if proof is required, you will not be able
to remove any true negative items through rapid rescoring.
These services can be costly, depending upon the number of
errors. On average, you should expect to pay around $100 for each
error to be corrected with all three credit bureaus. The average
cost of credit restoration ranges from $300-$750, so if you have
several items you need to challenge, you may be better off with
credit restoration. Prices vary with each company. More money does
not always mean better service.
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 the credit score, which makes it impossible to
predict a change in the score; although, manipulating the factors
of the score can have a positive influence. This can be
accomplished with both rapid rescoring and credit restoration. The
score also reflects the credit behavior of the client at all times.
The client is responsible for his credit and must be on his best
credit behavior during these processes. These services cannot
control the clients' behaviors. Irresponsible behavior can conflict
with the services and have a reverse affect on the credit
score.
Rapid rescoring and credit restoration are both useful tools for
correcting credit reports and increasing credit scores. Rapid
rescoring can be useful when a broker gets caught in a bind and
needs a quick fix when financing a client. Many times, because of
erroneous information on a credit report, rapid rescoring can mean
the difference between making and losing a deal. If you have
several items to remove, credit restoration can be easier and less
expensive than rapid rescoring. Results are still produced quickly,
though not quite as fast as with rapid rescoring, and they will
vary depending on the company used. Consider both options and
decide which service will best fit you and your clients' needs.
Sometimes, a client may even benefit from using both rapid
rescoring and credit restoration for maximum results. The key for
the lenders and brokers is using these tools to overcome the
obstacles that prevent them from closing the deal.
Sherene Costanzo is vice president of Credit Consultants
Inc. She may be reached at (888) 522-7007 or e-mail
[email protected].
