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Archive for Friday, August 18, 2006

Rescoring can help buyers save

August 18, 2006

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Q: We signed a contract to purchase a home. However, when we subsequently applied for a mortgage, our credit report came back with a few errors on it, and the credit bureau says it will take up to 30 days to review the discrepancies and make any changes. The bank wants to charge us a higher interest rate because the errors have lowered our credit score, and the whole purchase might fall apart if we can't meet our planned Sept. 5 closing date. What can we do?

A: Your tale serves as a reminder for buyers to get a copy of their credit report - and also get preapproved for a mortgage by a lender - before they start shopping for a house.

Obtaining a credit report early in the house-hunting process allows plenty of time for buyers to fix any errors, while getting preapproved for a loan helps them to avoid wasting time looking at homes they simply cannot afford.

It's true that federal law gives credit bureaus up to 30 days to investigate any errors that a consumer calls to their attention. But few buyers realize that most lenders also employ independent companies that can work with the bureaus to fix mistakes more quickly and "rescore" their credit to qualify for the best loan terms possible.

Ask the bank that you're working with if it has a rescoring service. If it does, you'll need to provide documentation to the rescorer to prove that the information on your credit report really is inaccurate.

You probably also will have to pay a rescoring fee of $150 or so. It will be money well-spent if rescoring helps you get a better loan deal and prevents your pending home purchase from falling apart.

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