Rapid Rescores vs. Credit Supplements: What’s the Difference?

With today’s rising home prices and elevated interest rates, buying a home comes with significant costs. As a result, many borrowers are eager to save on their mortgage payments.

One powerful way to minimize your mortgage payments is to apply for your loan with a strong credit score and low debt-to-income (DTI) ratio. While it can take time to build a high score, tools like rapid rescores and credit supplements can optimize your creditworthiness in the final stages of the home-buying process.

So, what are these tools, and how do they work? In this article, we’ll explore the differences between rapid rescores vs. credit supplements, as well as how they work, how much they cost, and who typically pays for them during the lending process.

Table of Contents

What is a Rapid Rescore?

Many aspiring homeowners take proactive steps to improve their credit, from paying down their credit card balances to disputing errors on their credit reports. Unfortunately, these positive changes don’t reach their credit reports right away — creditors can take up to 30 to 45 days to report new credit activity.

That’s where rapid rescore comes into play. This service facilitates faster updates to applicants’ credit reports, often incorporating them within three to five business days. Here’s how it works:

The borrower makes positive changes – First, the applicant must take steps to improve their credit score. If they don’t know where to start, they can request personalized suggestions from their mortgage lender. At Certified Credit, our credit score improvement tools can assist with this process.
Their lender requests a rapid rescore – Borrowers can’t request rapid rescores on their own. Instead, their lender must contact the credit bureaus on their behalf, request the expedited update, and provide proof of the change.
The credit bureau implements the updated information – Once the credit bureaus receive the updated information and supporting documentation, they’ll incorporate the changes right away. Shortly after, the lender can order an updated credit score to see if it enhances their applicant’s eligibility.

By integrating positive changes faster, rapid rescore can help borrowers boost their credit scores in a time crunch and potentially secure more favorable mortgage terms before closing on time-sensitive properties.

Rapid Rescore Example

To clarify the benefits of rapid rescores, let’s take a look at an example: Consider a homebuyer who submits an offer on their dream home and enters a 21-day escrow. Their lender pulls their credit and discovers they have a 692 credit score, which is just eight points below the 700-point threshold that would qualify them for a lower interest rate.

After reviewing this applicant’s credit history, the lender identifies that their credit utilization could use some improvement. They suggest that the applicant pay down their credit balances and dispute an outdated account. As soon as the borrower enacts these changes, the lender requests a rapid rescore.

Three days later, the applicant’s credit reports from Experian, Equifax, and TransUnion showcase the new changes, giving the lender the green light to order their credit scores one more time. To the lender and borrower’s delight, their credit score shot up to 702, making them eligible for a lower interest rate.

Who Pays for Rapid Rescores?

Rapid rescores cost around $40 per bureau for every line item update. Lenders typically pay for this service. Rapid rescore’s fees are minimal compared to the potential savings borrowers can achieve in interest over the life of their mortgage by securing a higher credit score.

What is a Credit Supplement?

While a rapid rescore can accelerate updates to an applicant’s reported credit activity, a credit supplement is designed to clarify discrepancies and provide more context about a borrower’s creditworthiness. These supplements are usually requested by loan underwriters, as opposed to borrowers themselves.

Here are a few situations where credit supplements can be useful:

A credit report features outdated or inaccurate data – Lenders want to make their decisions using the most accurate, up-to-date information possible. If they discover any outdated data, they may request a credit supplement to correct the information and ensure that the borrower’s credit report reflects their current financial situation.
A line item requires more context – Credit reports don’t capture the full context behind certain line items. For instance, a borrower with past due payments may have a formal payment plan set up with their creditor that’s not shown on their credit reports. A credit supplement can integrate this information and provide more context about the situation, giving loan underwriters a clearer picture of their financial circumstances.
The borrower wants to bolster their creditworthiness with alternative credit data – Some borrowers may have limited credit histories or want to highlight positive payment behavior that isn’t traditionally included in a credit report. In such cases, a credit supplement may allow them to add alternative credit data, such as on-time rent or utility payments, to provide a fuller picture of their financial responsibility.

Like rapid rescores, credit supplements often require supporting documentation. Additionally, applicants may want to include letters of explanation about certain line items, such as the events that led to their past late payments, judgments, or bankruptcy.

Read More: What is Alternative Credit Data?

How Do Credit Supplements Work?

Unlike rapid rescores, borrowers directly participate in the credit supplement process. Here are the steps involved:

The lender arranges a conference call – Credit supplements typically involve a three-way call between the borrower, the creditor in question, and the credit bureau. During the call, the borrower must verify their identity and consent to sharing their updated information with the credit bureau. After that, their creditor must verify their supplemental information.
The credit bureau adds the new information – Shortly after, the credit bureau will review the new information, ensure its accuracy, and update the borrower’s credit report accordingly.

Most credit supplements are processed within five days, enabling borrowers to update their credit in time to meet tight mortgage deadlines. However, if multiple account updates are required, the borrower may need to carve out time to participate in several conference calls.Credit Supplement Example

Let’s say an aspiring homebuyer applies for a mortgage, only to discover that their credit report shows that their student loans aren’t marked as “deferred.” This error inaccurately increases their DTI and subsequent mortgage eligibility.

The lender promptly schedules a credit supplement conference call with their student loan provider and the credit bureaus to resolve the issue. During the call, the applicant gives their permission to update the student loan status and the student loan provider verifies their claims.

Within a few days, the borrower’s credit report is updated to reflect the accurate status of their student loans, resulting in a notable decrease in their DTI and subsequent mortgage eligibility.

Who Pays for Credit Supplements?

Unlike rapid rescores, credit supplements are typically paid for by the borrower, with costs ranging from $15 to $20 per supplement.

What are Automated Credit Supplements?

Credit supplements play a crucial role in ensuring the accuracy and completeness of mortgage applicants’ credit reports. However, traditional methods can be tedious for lenders and borrowers alike. That’s where Certified Credit’s Automated Credit Supplements can make all the difference. This easy-to-use solution eliminates the need for inconvenient conference calls and can speed up supplement turn times by 50% or more.

Here’s how it works:

The lender initiates a credit supplement request.
The lender sends a secure link to the borrower, which leads to a unique landing page.
The borrower logs into their financial accounts from this secure web page.
The borrower adds their updated information to their credit file in a few clicks.

By taking the hassle of three-way conference calls out of the equation, Automated Credit Supplements make this process more efficient, convenient, accurate, and secure.

Hone Your Creditworthiness With Certified Credit

Whether you’re looking to boost your credit score or ensure your credit reports’ accuracy, rapid rescores and credit supplements offer significant benefits. However, these tools don’t generate positive changes beyond the ones you create through responsible credit management. That’s why it’s important to build a strong baseline of creditworthiness from the start.

If you want to learn more about the foundations of good credit, check out the following articles:

Are you a mortgage lender looking to boost your approval rate and generate more business? If so, Certified Credit has you covered. Along with our Automated Credit Supplements, we also provide rapid rescores, credit score improvement tools, risk mitigation solutions, and much more. Schedule a credit consultation with our team today to learn which suite of solutions is right for you.

Sources:

U.S. News. When Does My Credit Card Report to the Credit Bureaus?

https://money.usnews.com/credit-cards/articles/when-does-my-credit-card-report-to-the-credit-bureaus

U.S. News. What Is a Rapid Rescore and How Does It Work?

https://money.usnews.com/loans/mortgages/articles/what-is-a-rapid-rescore-and-how-does-it-work