Disputing Derogatory Credit


2014 Rules On Disputing Derogatory Credit

Home buyers who are thinking of hiring a credit repair company or thinking of doing credit repair need to realize that there are new rules on disputing derogatory credit in 2014.  Disputing derogatory credit is not allowed for non-medical collection accounts with a credit balance of over $1,000 during the mortgage application process. You can dispute derogatory credit items that are non-medical creditors with zero balance and/or charge offs but if you have non-medical creditors and/or collection accounts with balances, you need to retract the derogatory credit dispute and/or have to paid the item off to a zero balance.  Unfortunately, if you retract a derogatory credit dispute, your credit scores can and often times will drop.  There are cases where a mortgage applicant had to retract several derogatory credit dispute and once the disputes were retracted, her credit scores plummeted over 80 FICO points where she no longer was eligible to qualify for a residential mortgage loan.   Disputing derogatory credit that is a medical collection and/or a medical creditor is allowed and you do not have to retract the derogatory credit dispute.

Disputing Derogatory Credit: What Is It?

Credit bureaus do misreport information on your credit report that is inaccurate, not yours, or derogatory information that does not belong to you.  The three major credit reporting agencies, Transunion, Equifax, Experian, all need to respond to any consumer that has a credit dispute.  A credit dispute is when a consumer will notify the credit bureaus in writing via certified mail disputing derogatory credit.   The dispute can just state that the derogatory credit reporting on the consumer’s credit report is not correct.  The credit bureau then has 30 days to contact the creditor and/or collection agency and complete their investigation.  If the creditor and/or collection agency does not respond back to the credit bureaus within the 30 days mandated by law, the credit bureaus need to remove the disputed derogatory item from the consumer’s credit report.

Disputing derogatory credit is the most common method used by credit repair companies to remove derogatory items off a consumer’s credit report.  The older the derogatory credit item is, the easier it is to remove a derogatory credit item because many times older derogatories are harder to verify and/or have been sold to multiple collection companies.  Nothing is wrong with disputing derogatory credit, however, keep in mind that disputing derogatory credit that is non-medical account with a balance greater than $1,000 can affect your mortgage application process.

Gustan Cho


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