Credit Disputes And Mortgage Process Guidelines

Credit Disputes And Mortgage Process Guidelines

This BLOG On What Are The Guidelines On Credit Disputes And Mortgage Process Was UPDATED On December 15th, 2018

Consumers who have bad credit and need to repair credit normally go about disputing derogatory credit items to the three major credit reporting agencies;

  1. Experian
  2. Equifax
  3. Transunion

How Does Credit Repair Work

Consumers need to write credit dispute letters to the credit reporting agencies requesting that to investigate derogatory tradelines.

  • Credit reporting agencies has 30 days to notify the creditor and the get verification on the disputed item
  • If the creditor does not respond or come back with validation, the  credit dispute is considered valid
  • The credit bureaus needs to delete them off the consumer credit report

Credit Dispute Process

Credit disputes is a process. Takes 60 or more days if it is done by consumers. Lenders can do a rapid rescore where it takes three to five days. To do a rapid rescore, the loan officer needs proof that the credit tradeline is wrong. It gets updated in no longer than 5 days.

  • In the event if the credit reporting agencies do not remove derogatory information after the original credit dispute the first time, consumers can re-dispute negative credit items
  • This is done by sending them follow up credit dispute letters hoping the credit reporting agencies will eventually remove them
  • Removing negative credit items will clean up credit report and can potentially improve credit scores

Mortgage Application Process And Credit Disputes And Mortgage Process

Borrowers with prior bankruptcies and foreclosures can qualify for mortgage loans. FHA Loans is the most popular loan program for borrowers with less than perfect credit and higher debt to income ratio.

  • Home Buyers can qualify for FHA Loans two years after a Chapter 7 Bankruptcy discharged date
  • Buyers can qualify for FHA Loans one year into a Chapter 13 Bankruptcy repayment plan with Trustee Approval
  • Buyers can qualify for FHA Loans with no waiting period after a Chapter 13 Bankruptcy discharged date
  • Home buyers who have a foreclosure, short sale, or deed in lieu, there is a mandatory waiting period of 3 years from the official date of the foreclosure to qualify for FHA Loans
  • For folks who have just filed bankruptcy and/or foreclosure, it is strongly recommended that they start repairing their credit and start rebuilding their credit scores
  • When their waiting period is up, they can qualify for a residential mortgage loan
  • Repairing credit involves credit disputes with the credit reporting agencies
  • However, if waiting period is almost over and mortgage applicants intend on getting a mortgage, they cannot have any pending credit disputes on non-medical collections and charge off accounts
  • Lenders will suspend a mortgage file if there are active credit disputes. 
  • Retracting credit disputes will drop credit scores
  • Reason for the credit score drop is because whenever someone disputes a credit tradeline, the credit bureaus will automatically discount the disputed item from the credit scoring model
  • Many folks do not realize this and ruins their plans

Guidelines On Credit Disputes And Mortgage Process

Credit Disputes And Mortgage Process do not go hand in hand. Mortgage Applicants where they are nearing the mandatory waiting period is a month or two away and are planning on applying for a mortgage, they need to make sure that there are no active credit disputes pending on credit report.

  • Mortgage Loan Applicants who  still have credit disputes and are ready to apply for a mortgage loan need to retract credit disputes before starting the mortgage application process
  • Loan Officer can assist borrowers
  • Consumers who have hired a credit repair company, the credit repair company can help resolve this matter
  • Retracting credit disputes can possibly drop credit scores, so keep that in mind also if credit scores are on a borderline cutoff requirement for a specific mortgage program

Credit Repair

Borrowers do not need credit repair to qualify for mortgage. Older derogatory credit items does not affect credit scores.  Whatever a credit repair company does, consumers can do it themselves. Credit repair can do more damage than good. Borrowers can qualify for home loans with older derogatory credit tradelines on their credit report. However, lenders do want to see timely payments in past 12 months. Re-established credit after bankruptcy and/or housing event is a must. Please contact Gustan Cho Associates Mortgage Group at 262-716-8151 or text us for faster response to qualify for home loans with bad credit. Or email us at

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