Credit Repair: Can Be Cause A Mortgage Denial

Millions of Americans fell victim to the economic, real estate, and banking collapse of 2008.  Many lost their businesses and jobs which led them to bankruptcy and/or foreclosure.  The economic recovery took longer than most economic recovery in history.  Once Americans got back to work, many saw that they had damaged credit and many hired credit repair companies to repair their credit and start re-establishing their credit.  Other folks repaired their credit by themselves hoping to delete prior derogatory information.

Basic Credit Repair Strategies

Anyone can repair their credit and it is not rocket science to do credit repair.  The way you repair your credit is to first obtain a copy of your credit report.  You then do a credit dispute to the three credit reporting agencies:  Transunion, Experian, and Equifax.  You normally write them a letter disputing that the derogatory credit item is not yours and the credit reporting agencies will contact the creditor you are disputing to verify your credit dispute.  If the creditor does not respond back to the credit reporting agencies within 30 days, the credit disputed derogatory item needs to fall off your credit report.  Credit repair companies use this strategy in repairing your credit.  However, this credit dispute strategy can back fire on you big time if you are in the process of applying for a residential mortgage loan and can cause a mortgage loan denial.

Credit Dispute: NOT ALLOWED Per Fannie Mae And Freddie Mac Guidelines

It will not matter whether you have credit scores over 800 FICO scores but credit disputes with balances on them are NOT ALLOWED per Fannie Mae and/or Freddie Mac mortgage lending guidelines.  Any disputes with a balance on it will be an automatic disqualification and the credit dispute needs to be retracted before the mortgage loan approval process can continue.   Mortgage loan originators should not issue a pre-approval until they have reviewed the mortgage loan borrower’s credit report and make sure that there are no credit disputes on their credit report.  Credit disputes can be retracted, but a major problem is that once a credit dispute is retracted from the borrower’s credit report, the borrower’s credit scores will drop.  For those who had borderline qualifying credit scores can get hurt big time if the credit dispute is retracted.  Retracting a credit dispute can cause a borrower’s credit scores to drop by 80 FICO points or more.

Things To Consider Before You Hire A Credit Repair Company

If you are planning on hiring a credit repair company and intending on buying a home in the near future, make sure you tell your credit repair company that you do not want to dispute derogatory credit items with credit balances on them.  Another thing you should realize is that older derogatory items stay on your credit report for only 7 years and have no impact on your credit scores.  Many times consumers do not need the services of a credit repair company.  The older the credit derogatory item is, the less of an impact it has on the consumer’s credit scores.  Many times your credit scores will not change by having a derogatory item deleted.  It is next to impossible to get a recent credit late payment deleted via the credit dispute method.  The older the derogatory item is, the easier it is to remove it from your credit report.  You can still qualify for a mortgage approval with prior bad credit and open collections without having to pay them off.

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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