'Credit rescoring' helpful in time crunch

Banks are tightening their loan requirements, but consumers who find that there are errors on their credit reports could get better loan terms if they hire a legitimate "credit rescoring" company.

Q. I signed a contract to purchase a new home last month and then went shopping for a mortgage. It turns out that my credit report has several errors on it, and the credit bureau says it will take about 30 days to review the discrepancies and make the corrections. The bank now wants to charge me a higher interest rate because the errors have lowered my credit score, and the sale might have to be canceled (which means I would lose my $10,000 deposit) if I cannot meet my scheduled closing date 15 days from now. What can I do?

A. Your letter serves as a reminder for other buyers to always get a copy of their credit report -- and also get pre-approved 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 pre-approved for a loan helps them to avoid wasting time looking at homes they cannot afford.

Federal law gives credit bureaus up to 30 days to investigate any errors that a consumer calls to their attention and then make any needed corrections. That's a reasonable amount of time to settle most disputes, but it's tough on buyers who are facing a fast-approaching closing deadline and owners who are trying to refinance their mortgage before their rate-lock expires.

The good news is that most lenders are willing to work with so-called "credit-rescoring" companies that can correct mistakes in a consumer's credit report within a few days, rather than several weeks.

Ask the bank or mortgage broker that you're dealing with to recommend a credit-rescoring company. Doing so will help you get a legitimate firm that can do the work quickly, rather than a fly-by-night company that might not keep promises to "fix" your credit immediately.

You will need to provide the credit-rescoring firm with canceled checks or other documentation to prove that the information on your credit report is inaccurate. You will probably also have to pay a rescoring fee of $150 to $300.

Although no one likes such unexpected costs at closing time, it will be money well-spent if rescoring helps you get a better loan deal and prevents your pending home purchase from falling apart.

Q. A vacant house in my neighborhood was recently put up for sale. It is being advertised at a price that is "$20,000 under BPO." What does this term mean?

A. "BPO" is lender shorthand for "broker's price opinion."

BPOs usually involve properties that lenders have foreclosed upon. They are prepared by local realty agents, who physically examine the home, obtain estimates to make any repairs, and determine how much similar homes in the same neighborhood have recently sold for.

The completed BPO then helps the lender set its asking price for the foreclosed property. The fact that the vacant home you're wondering about is being advertised at $20,000 below the broker's price opinion suggests that the bank is anxious to sell the home and get the soured loan off of its financial books.

Q. I recently received an e-mail that apparently came from the IRS. The note offers me $80 if I complete a brief online "customer-satisfaction survey." Is this offer legitimate, or is it some type of scam?

A. It's a fast-growing scam operated by identity thieves, says Internal Revenue Service Deputy Commissioner Linda Stiff.

Under a typical version of the scheme, a taxpayer gets an unsolicited e-mail that mentions the IRS in both its "from" and "subject" line. Recipients are also told that they have been selected to partake in a survey, and that their taxpayer account will be credited with $80 (or some other amount) if they participate.

Consumers who unwittingly nibble at the identity thieves' bait are electronically patched over to an Internet site that's supposedly run by the IRS itself. The bogus site even features the government agency's official logo and a copyright warning saying that it's a crime to use the logo for illegal purposes.

After that, the scam picks up steam by slowly extracting information from the taxpayer -- basic information at first, such as full name and address, then a phone number, then ultimately a Social Security number or bank and credit-card information that the identity thief can use to empty the victim's life savings.

The IRS never contacts taxpayers by using e-mail, Stiff notes, so your safest move is to automatically hit your computer's delete button if you receive a message that suggests that it was sent by the agency's staff.

© 2007, Cowles Syndicate Inc.