What Is A Credit Dispute?

A credit dispute is when a consumer disputes a derogatory credit item on their credit report in hopes of getting it removed, corrected, or deleted off their credit report.  Credit disputes are a very popular way of credit repair companies to use as a strategy of trying to delete derogatory items.  What happens is a consumer can dispute a derogatory credit item by writing a letter to the three credit reporting agencies stating that the information posted on their credit report is incorrect or that the derogatory information posted on their credit report does not belong to them.  The credit bureaus ( Transunion, Experian, Equifax ) then notifies the creditor that the consumer is disputing and the creditor has 30 days to respond with the validity of the credit dispute.  If the creditor does not respond with the validity of the derogatory information the consumer is reporting, then the credit bureaus needs to delete the derogatory credit items the consumer is disputing.  Older derogatory items that have been sold many times over to various collection agencies are easy to get deleted because records have gotten lost over time and many credit repair agencies have great success in getting older derogatory credit items off.  However, recent derogatory credit items are tougher to get deleted.  Many derogatory items that in fact belong to the consumer will get removed if the creditor does not respond to the three credit reporting agencies within the 30 day period required by federal law.

Credit Dispute During Mortgage Approval Process

2015 HUD and Fannie Mae Guidelines on credit dispute during mortgage approval process states that a mortgage loan applicant cannot have a credit dispute on non-medical items that the total aggregate amount exceeds over $1,000.  If you have multiple credit disputes on non-medical items with balances totaling over $1,000, you need to retract the credit disputes in order for your mortgage approval process to continue.  If you have credit disputes on non-medical items with unpaid balances over $1,000, your mortgage approval process will come to a halt until the credit disputes are retracted and removed off your credit report.

Zero balance collection accounts and charge offs on non-medical accounts do not count with credit dispute.  You can dispute zero balance collection accounts and charge off accounts that reflect zero balance on your credit report.

Medical collection credit disputes, whether it has unpaid balances or not, are exempt from credit dispute rules and guidelines.  You can dispute medical collection acccounts with open unpaid balances and it will not affect your mortgage loan approval process.

Negative Factors In Retracting Credit Dispute

If you need to retract credit disputes with open credit balances in order to proceed with the mortgage approval process, one negative outcome out of retracting your credit dispute is that it will lower your credit scores.  Whenever there is a credit dispute retraction, there is a negative impact on the consumer’s credit report.  How much will a consumer’s credit scores drop?  That depends on the individual consumer.  I have seen credit scores drop anywhere between 10 FICO points to over 100 FICO points.  If you are intending on applying for a mortgage loan in the near future and intend on repairing your credit, make sure you do not dispute credit items with unpaid balances.

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The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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