Credit repair is the process of trying to correct errors from your credit report by disputing the inaccuracies to the three major reporting agencies. Credit repair is also trying to remove and/or delete accurate derogatory items by disputing it to the three major credit reporting agencies in the hopes the creditor does not respond to your dispute within the 30 days mandated by law. Anyone consumer can dispute a derogatory credit item. Once you dispute the derogatory item to the three credit reporting agencies, the credit reporting agencies will relay the dispute to the creditor that is reporting the negative item to your credit report. The creditor has 30 days to respond back to the credit reporting agencies with validation of the why they are reporting you late or as delinquent. If the creditor does not respond back to the credit reporting agencies within the 30 days mandated by law, the credit reporting agencies need to delete the disputed item or else they are in violation of Federal law. It is no rocket science to repair your own credit. However, credit repair may back fire on you when you are applying for a residential mortgage loan.
Credit Disputes With Balances Are Not Allowed In Mortgage Application Process
If you are undergoing credit repair and you are in the process of applying for a residential mortgage loan, Fannie Mae does not allow you to dispute any derogatory items with a credit balance. You can dispute derogatory items with zero balances or charge offs but if you dispute a collection account or credit account that still has an outstanding balance, your mortgage application will be suspended until the dispute is removed/retracted and/or paid off in full. This normally takes time and will delay your mortgage application anywhere from 30 to 90 days unless you pay for a rapid rescore, which can be costly.
Retracting Credit Dispute Will Lower Your Credit Scores
If you retract a dispute with a credit balance, the chances are that your credit scores will drop. Depending on how many disputed items you have, your credit scores can drop significantly once your disputes are retracted from the credit reporting agencies. Another risk factor you might possibly encounter is that the creditor you are disputing might not let you retract the dispute. If this is the case, your mortgage application will be delay indefinitely until the disputed items are settled.
Think Twice Before Starting Credit Repair Regiment Yourself Or Hiring Credit Repair Company
I strongly recommend that everyone try to repair their credit and establish new credit. However, if you are intending in applying for a residential mortgage loan, please do not dispute any credit items with credit balances. A good letter of explanation to the underwriter will do. Worst case scenario, you can settle to pay the creditor if the creditor is willing to delete the derogatory item.
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