Rapid Rescore: Who pays?

16 Replies

Working on a cash out refinance for two investment properties in DC. Credit agencies aren't reporting correct revolving credit line balances/utilization and lender is suggesting rapid rescore to increase fico. 

There's a debate about who pays for this. There are many places online that state that it is illegal to charge consumer for rapid rescore per the Fair Credit Reporting Act. (See https://nationalmortgageprofessional.com/blog/charging-consumer-rapid-rescore)

In your experience, who historically pays for a rapid rescore? 

@Jacob Chaney As a lender I can tell you that we have operated under the assumption that the client cannot pay for the rescore. They are also expensive as heck (can’t remember what it is now but last I checked, $150 per trade line, per burea you want to rescore). So if you want to remove one item from all three, lender is smacked with $450.

I certainly cannot speak on behalf of all lenders but we eat this. We don’t increase another fee (not sure how people do that) and we don’t charge it in the rate. I am sure some lenders are not following the same path.

Hope this helps.

@Jeff Dulla Thank you for the reply Jeff. Is the reason you don't pass these costs on to borrowers is because your company believes it's prohibited by law or is this just a matter of company policy/customer service?

@Jacob Chaney with the fact that it takes up front consultation, knowledge, some time, paperwork, etc, I think we would love to charge for it.

We have been advised that we are prohibited from charging these services to the borrower. In 16+ years of existence, our company has operated under that assumption.

Originally posted by @Jacob Chaney :

Working on a cash out refinance for two investment properties in DC. Credit agencies aren't reporting correct revolving credit line balances/utilization and lender is suggesting rapid rescore to increase fico. 

There's a debate about who pays for this. There are many places online that state that it is illegal to charge consumer for rapid rescore per the Fair Credit Reporting Act. (See https://nationalmortgageprofessional.com/blog/char...)

In your experience, who historically pays for a rapid rescore? 

I have no idea what's legal. How we handle it...

 - If someone wants to use us as a credit repair service, we pass. No need to charge the consumer, since we aren't a credit repair service.

- If someone is not yet under contract and/or hasn't gotten the refinance started, then there's no need for a 'rapid' anything, so we tell them what to do and they do it, the credit report will update in a month in due time. No need to charge the consumer since there's no need for anything 'rapid.'

- If someone is in the process, appraisal paid for & in underwriting, etc, then we cover it.

I dont think a lender can charge for a rapid rescore...but I also dont think a lender has to offer a rapid rescore either. 

Originally posted by @Russell Brazil :

I dont think a lender can charge for a rapid rescore...but I also dont think a lender has to offer a rapid rescore either. 

 That's a good point. All a lender HAS to do is collect paperwork as-is m-f 9-5, submit to underwriting without thinking or reviewing any of the submitted paperwork, and wait for the inevitable loan denial.

@Jacob Chaney Lender can't charge of rapid scoring although there is huge expense to do rapid scoring spend on trade lines. 

I agree. The lender is under no obligation to offer a rapid rescore. 

However, as a consumer, I'm free to take my business to a lender looking to get me the best terms but who also complies with federal law when it comes to passing fees to customers. 

My question here is what others are doing and if their practices are rooted in the law or simply company policy. 

@Jacob Chaney The rapid rescore fee cannot be charged to the borrower, directly or indirectly due to the FCRA (Fair Credit Reporting Act). Our order forms from our credit vendor state in bold print that the cost for a rapid rescore cannot be passed along to the consumer.

I agree with @Chris Mason - When necessary I would be willing to do this for a loan that is in escrow and likely to close; however not all situations call for a rapid rescore.  If someone is just starting the process and getting pre-approved, there is likely enough time to work on fixing an error outside of this process.  If credit card debt needs to be paid down to qualify, it's better to pay the debt, let it report, and then order a new report, especially if you're talking about multiple accounts, since that can get quite expensive.  Results are NOT guaranteed with a rescore.  There's also a chance that the creditor could keep reporting the same error going forward.

Keep in mind that there is a lag time in reporting balances on credit cards.  Your credit report is typically going to show the balance on your statement from a month or two ago - whenever the creditor last reported your account to the bureaus.  It's not going to show your exact balance on the day your report was pulled.  

You might want to mention what the credit report errors are.  Like @Stephanie Irto alluded to, balances on credit card accounts report once a month the balance on your statement.  If you have paid down your card, and a new statement amount has not yet reported...that is not an error.

@Russell Brazil @Chris Mason  @Stephanie Irto  @Jeff Dulla   @Harjeet Bhatti I uderstand that you might not consider it an error but it's enough of a problem and inaccuracy to severely drag down my FICO and therefore my loan pricing. All other fundamentals are super solid. My DTI is good, documented income levels are healthy and all signs point to these being solid loans for my lender with the exception of this FICO issue which I've traced to inaccurate credit balance reporting.

Would you all recommend that I just wait it out for the next two weeks for my accounts to report to the credit bureau's instead of paying the $430 my lender wants for the rapid rescore?

Originally posted by @Jacob Chaney :

@Russell Brazil @Chris Mason  @Stephanie Irto  @Jeff Dulla   @Harjeet Bhatti I uderstand that you might not consider it an error but it's enough of a problem and inaccuracy to severely drag down my FICO and therefore my loan pricing. All other fundamentals are super solid. My DTI is good, documented income levels are healthy and all signs point to these being solid loans for my lender with the exception of this FICO issue which I've traced to inaccurate credit balance reporting.

Would you all recommend that I just wait it out for the next two weeks for my accounts to report to the credit bureau's instead of paying the $430 my lender wants for the rapid rescore?

 If this is that the monthly reporting of new balances has yet not happened...it is not an error...therefore a rapid rescore will not help. A rapid rescore is done to correct an error then get a new score. If youbare waiting for new balances to report, you can look at your credit report, see what day of the month it typically reports then you will need to wait to that day in the monthly cycle to get an updated score. Til then, your score is correct as to your current situation.

@Jacob Chaney   You could really do it either way.  If your lender is not willing to pay for it (and that is not an insignificant amount to ask them to pay, although it also depends on your loan amounts), you could wait a few weeks and have them pull a new credit report.  If you do take this approach of waiting and then pulling a new credit report, I would try to do some investigation first to make sure the new balances are actually reporting.  With waiting you run the risk of interest rates rising or having to pay a lock extension fee if you've already locked, which might outweigh any benefit you're getting from better pricing.  Even waiting an extra few days for the rescore could cause you to need a lock extension.  Your score is not guaranteed to go up with a rescore or with a new credit report, but it sounds like a decent possibility.

Either way, you're really not allowed to pay for it, even if you're the one asking for the service.

This probably doesn't apply to you, but another thing to keep in mind if you do the rescore:  only the accounts you're requesting to be updated will reflect the current balances.  If you have OTHER accounts that showed a $0 balance at the time your report was pulled, but you've since added charges to those accounts and they have reported recently, when your report is repulled after the rescore is complete, it will be for ALL accounts.

For example say I have 5 accounts: A B C D E.  Accounts A & B each had a $5000 balance on my last credit report.  C, D, and E all showed a $0 balance.  This was for my statements closing in mid January, and my credit report was pulled January 31st.  I've since paid off A & B, but now C, D, and E each have a balance of $2500, and those balances have reported to the bureaus for February.  With a rescore, A & B will show the CURRENT balances, as verified by the bureaus, but C, D, and E will show whatever was most recently reported.

In the future if you want to avoid high balances from reporting on your credit, pay your accounts off BEFORE your statement closes for the month.  This way when you get your statement, it will have a $0 balance due.  This is much different than waiting until you get your monthly statement to pay your bill in full.  You don't even want to have a balance owed when you get your statement.

The way the credit score systems work is not that great.

My credit is immaculate but score is not as high as it could be. Reason is I love to use the zero interest same as cash deals where I have zero interest if paid off in 1 or 2 years etc. I have paid off lots of these.

The issue is that they usually set limit at what you are buying so if buying 3,000 they set at 3,100 or something. So when credit reports it looks like you are using 90% percent or more of available credit and it dings your score some. Also with newer credit it dings you with an account for about 3 months or more. I can easily pay cash many,many times over for these lines of credit I have.

When I apply so far I always get approved. The system does not take into account someone that has the money but just wants to use the zero interest and keep their cash longer.

The system is designed more for the typical consumer working a 9 to 5 job collecting a pay check. The algorithms are not designed for the smaller groups that are outside the box.

@Jacob Chaney I work with mostly direct lenders and Banks, we never charge to borrowers even though  sometime my branch paid  higher amount what you have mention. There is system for rapid score. If you are doing rapid scoring for just to report balance you could wait but if you are rapid scoring for some other reason its better to go other way around.  

@Jacob Chaney   Here's one more idea, in case the cost is the main reason for your lender hesitating on this.  You don't have to rescore all three bureaus.  Say you have a 707 with Transunion, 719 with Experian, and 747 with Equifax.  I'd leave the Equifax alone and just rescore the accounts with Transunion and Experian.  That would save 1/3 of the cost.  Of course it depends on your individual scores.    

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.