Your loan officer has pulled your credit and your scores are just a little short of where they need to be. He thinks there are possibilities for an improvement so he runs a “What If Simulator” to see what could possibly be done to get the scores a little higher. Most of the time, this would be done by paying down a credit card. Once he finds a solution, he sends you home to pay the card down, print off a snapshot of the new balance and bring it back. He will then order a rescore from the credit reporting agency so it will be updated in an expedited manner and generate new scores. But just how accurate are these simulators and do they really work?
First, with a What If Simulator you can go into a credit report and simulate changes, such as paying down a balance or removing a late payment. The simulator will then calculate a number of points that could be gained by making that change. While the simulator is not available to individual borrowers, it is often used by loan officers when a borrower applies for a mortgage.
Most of the time the simulator has an 85-90% accuracy rate. Since it is a third party product and not a credit bureau product, they are not infallible. However the company that created this has spent years perfecting the software and has created a product that has helped thousands of borrowers. There are a lot of variables that go into credit scoring which could throw the simulator off a little. For example, let’s say the simulator suggested a borrower pay their Discover card down to $300. Once the rescore is complete and the file re-pulled, it may turn out that the score doesn’t quite get to where the simulator suggested or doesn’t even move at all! A number of things could have happened: sometimes a balance will have gone up on another credit card or a new late payment shows up. If nothing else has changed on the report it could be that the score factors have changed. These are the 4 or 5 factors that you see underneath your credit scores. They are in order of importance and each one carries a different point valuation. Those point valuations vary from bureau to bureau. The score factors changing isn’t something that can be predicted or simulated and if they change, even a little, it can have a huge impact on what the simulator said might happen.
Another thing to remember is that doing a What If Simulator on a credit report that is over 30 days old is not going to be entirely accurate. Too many things can change in that time. Optimally any simulation would be done on a file that is under 30 days old. Any changes it suggests should be done within a short period of time for optimum effect. If you run a simulator on a file and then wait 30 or 60 days before the changes are made there’s a good chance you won’t achieve the desired result. Credit scores can change daily so any change a borrower makes based on a simulation should be done as soon as possible.
The most important thing to remember about a What If Simulator used by a loan officer is that it is just a possibility…there are never guarantees. There are too many variables when it comes to credit scores to ever guarantee what a score is going to do. Overall, it is a wonderful tool and has helped borrowers over and over again in being able to become homeowners. With an 85-90% accuracy rate it’s definitely worth having your loan officer use if your scores are a little on the low side. Just remember to execute any changes quickly and that scores can never be guaranteed.