What is a Credit Score Simulator and How Can it Help Me?

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rapid-rescoring

Say you applied for a mortgage but your credit score was just a few points shy of landing best possible interest rate due to an error on your credit report or a high balance. If you tried to fix the error or paid down the balance, it could take several weeks for your credit report to be updated through the normal channels.

What is a rapid rescore?

The process many mortgage lenders use is called rapid rescoring or rapid updating. It’s the process whereby they are able to get information on your credit reports changed much faster than if you were to attempt to get it changed on your own.  And, since credit-scoring systems are real-time, meaning your scores will change as your credit reports change, any positive modifications can mean better scores immediately.

Thanks to a rapid rescoring, you could potentially get approved for a mortgage at the lower interest rate within a few days. “If I paid off a credit card today, it might show up on my credit report 6-8 weeks from today,” says Joe Parsons, a senior loan officer with PFS Funding, a mortgage banker in Dublin, Ca. “Rapid rescore is simply a matter of providing documentation to the credit bureaus to get them to update information and shorten the normal reporting timetable.” An updated score is typically generated within about 72 hours, according to Parsons.

When is a rapid rescore the right choice?

Loan originators look at your credit reports and scores from Equifax, Experian, and TransUnion, then base your eligibility and interest rate on your middle score, ignoring the high and low scores. That means you’d only need to have the median score recalculated instead of recalculating all three.

If your middle scores aren’t good enough, your lender or mortgage broker is going to have a hard time getting you qualified for a loan or getting you qualified at the best terms. And since mortgage lenders are largely compensated on a commission basis, it’s in their best interest to get you qualified. Plus, they are probably very familiar with what affects credit score. So, at this point the goal becomes to get your credit reports modified, corrected, or updated so that your credit scores will improve enough to get you qualified.

Unless your median credit score already tops 740 (the cut-off credit score for the best interest rates), it’s probably in your best interest to consider a rapid rescore. “That low score is increasing the cost of the mortgage dramatically,” says Parsons.

Before going through the rapid rescore process, a loan officer like Parsons could run a FICO simulator to estimate how much your credit score could be improved by paying down a balance or making other changes. The impact of a rapid rescore varies depending on what derogatory items were on your credit report, but Parsons says it could save a consumer thousands of dollars in interest over the course of a loan.

Nowadays, you can access credit score simulator on FICO.com and other websites. It is critical to understand some of them are based on the VantageScore credit scoring model developed by the 3 credit bureaus, and others are based on the FICO score. It simulates scenarios of changing the values of credit factors, such as late payments, high credit limit and more credit cards. Then the decision tree will guide you through a list of qualification questions and spin out a hypothetical score. Be aware that the estimated new score is not guaranteed. However, credit simulator is a good tool to understand the impact of various factors and to find a path to improve your credit scores.

Rapid rescoring and credit repair

A rapid rescore is different from credit repair. Credit repair is a separate process that often involves a third-party company disputing derogatory items on your credit report that may or may not be accurate. With a rapid rescore, you’d need documentation that you’d paid off a high balance or collection account, or that an item on your credit report was reported inaccurately.

How fast is “rapid?”

Normally, credit reports take up to 45 days to “correct” if the consumer employs the standard protocol to update his or her credit report (pay off a balance, file a dispute, etc.). In the case of a mortgage loan application, 45 days just isn’t good enough because you could lose your interest rate lock. Enter rapid rescoring, the fee-based service offered by the companies who sell credit reports to your mortgage lenders.

For between $25-$50 per account per credit report (a cost absorbed by your mortgage lender), your mortgage lender can actually have information changed/updated on your credit reports within a few days rather than few weeks. They accomplish this by having atypical access to a specialized team of people at the credit reporting agencies that work directly with members of the mortgage industry to facilitate these expedited credit report corrections. For example, if you have a credit card incorrectly showing a $1,000 balance (that’s actually paid off), your lender can have the credit report updated to show a $0 balance faster than you can say “wow, now that was fast.”

Once the process of updating your credit files is completed, the mortgage lender can simply order an updated set of credit reports. When the credit reports are re-pulled from the credit reporting agencies, the applicant’s FICO credit scores will take into account the fact that the credit card now has a $0 balance. And, in many cases this will result in a better set of scores and possibly an approval rather than a denial.

The impression is that the applicant’s scores were rapidly changed, which isn’t at all what happened.  All that happened was the credit reports, which were not up to date in the first place, were corrected — thus yielding a more accurate set of credit scores. So, in a sense, rapid “re-scoring” is really little more than “rapid-correcting” of your credit files, and just one more tool when you are trying to figure out how to fix your credit.

You can trust that we maintain strict editorial integrity in our writing and assessments; however, we receive compensation when you click on links to products from our partners and get approved.
Published June 4, 2015 Updated: May 9, 2016
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2 responses to “What is a Credit Score Simulator and How Can it Help Me?”

  1. John says:

    The estimate from the mortgage loan officer is probably more accurate. However, It is easier to use a credit score simulator and get a quick read.
    If you goal is to understand the credit factors, credit simulator is great. I used the credit score estimator myself. It is very educational
    If you are trying to determine to pay off a debt or use the cash for downpayment, you should talk to the loan officer. The rapid scoring system may use other data as well and give you a different score.

  2. credit score simulator says:

    Here are some questions the FICO credit score simulator may ask you
    3. How many loans or credit cards have you applied for in the last year?

    0
    1
    2
    3 to 5
    6 or more
    4. How recently have you opened a new loan or credit card?

    less than 3 months ago
    between 3 and 6 months ago
    more than 6 months ago
    5. How many of your loans and/or credit cards currently have a balance?

    0 to 4
    5 to 6
    7 to 8
    9 or more
    6. Besides any mortgage loans, what are your total balances on all other loans and credit cards combined?

    As an example, let’s say you have two accounts:
    One auto loan with balance of $7,000
    One credit card with balance of $1,500
    Your total balances on all non-mortgage accounts would be: $8,500 ($7,000 + $1,500).
    I have only mortgage loan(s)
    Less than $500
    $500 to $999
    $1,000 to $4,999
    $5,000 to $9,999
    $10,000 to $19,999
    $20,000+
    7. When did you last miss a loan or credit card payment?

    I have never missed a payment
    in the past 3 months
    3 to 6 months ago
    6 months to 1 year ago
    1 to 2 years ago
    2 to 3 years ago
    3 to 4 years ago
    more than 4 years ago

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