Fixing Your Credit Score Can Be a Cinch

Oct. 27, 2006 — -- Somebody else's mistake may be costing you thousands of dollars. Then again, your own mistake may be costing you thousands of dollars. Either way, rapid rescoring can help.

If there's an error on your credit report, or if you haven't structured your debt very wisely, your credit score may not be as high as it could be. Rapid rescoring is a service offered by local credit bureaus. Unfortunately, it's not directly available to consumers. You'll have to go through your mortgage broker or lender.

Here's how it works. If there's a mistake on your credit report, you have to provide proof that it's a mistake. A rapid rescoring expert can research your claims and gather written documentation. Next, the expert forwards your materials to the three national credit bureaus and asks for a correction. You can do this yourself, but it takes weeks. Companies that offer rapid rescoring have dedicated phone and fax lines they use to communicate with the big credit bureaus. In 24 to 72 hours, your credit report is corrected and your credit score rises as a result.

Valerie B. wanted to refinance her town house to provide stability for her daughter and to pay for graduate school for herself. She had never checked her credit score, but she was confident she would have a high score because she had always been careful to pay her bills on time. But when the mortgage broker pulled Valerie's score it was just 598 on a score of 300 to 800. She needed to score at least 650 to get the low-interest rate she wanted.

So Valerie's broker recommended rapid rescoring. When the local credit bureau pulled up Valerie's credit report, it showed that she had never finished paying off her car loan. The bank had written off the loss, which is a huge black mark on any consumer's credit. It turns out, a big national bank had purchased Valerie's local bank around the same time she was making her final car payment. The new bank lost her paperwork and ruined her credit.

Once the local credit bureau corrected the mistake, Valerie's score soared from 598 to 790 -- near the top of the scale. At the lower score she was only able to qualify for a mortgage rate of about 8 percent. After rapid rescoring, she landed a loan at just 6 and five-eighths percent. You do the math -- that a huge difference. Over the life of the loan, Valerie was set to save $72,000 thanks to rapid rescoring.

In addition to correcting errors, a rescoring expert can help you restructure your debt to improve your score. For example, say you have three credit cards, and one of them is near the limit, but you hardly use the other two. By transferring some of that debt to the other two cards, you may be able to improve your score. Why? Credit scoring models are biased against consumers who are near their credit limits. Sounds dumb, but you can sometimes have the same amount of debt, and achieve a higher score just by spreading it around. Rapid rescoring experts say you should learn what your credit limit is on each card and keep your balance at less than 50 percent of that -- 30 percent is even better.

Here's another trick. Say you're young and your credit score is low because you're just getting started. Ask somebody with established credit (like a parent) to put you on his or her credit card account as an authorized user. That person's credit card company will issue you your own card, but you don't even have to use it. Even though it's not really your account, and you don't even get the bill, the account will become part of your credit record. This long-standing account will factor into your credit score. On the flip side, if you are an authorized user on the account of someone who manages that account poorly, a rapid rescoring expert may suggest you cut your ties to that account to improve your score.

I hope rescoring experts will soon make their services available directly to consumers and for purchases other than just real estate. Credit scores are calculated using hundreds of different variables. Some of those factors actually cancel each other out. You can take common sense steps on your own, but if you're about to make a big purchase and you need points fast, consult a professional. Thanks to rapid rescoring, you could score!

1. When you're ready to buy a house, don't paint yourself into a corner. Research your credit situation in advance so you'll have time to make adjustments and corrections.

2. If a mortgage company turns you down or doesn't offer you a low interest rate, ask if you're a candidate for rapid rescoring. It's a fairly new process, so you may have to educate your mortgage broker about it.

3. Do everything you can to gather written evidence to prove that negative entries in your credit report are false. That's the ammunition the rapid rescoring expert needs.

4. Make sure the rescoring expert looks not just at errors on your credit report, but also at ways to restructure your debt to achieve a higher score.