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Errors In Your Credit Report And How It Affects Qualifying For A Mortgage

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Errors In Your Credit Report And How It Affects Qualifying For A Mortgage

This BLOG On Errors In Your Credit Report And How It Affects Qualifying For A Mortgage Was UPDATED On June 9th, 2019

Errors In Your Credit Report And How It Affects Qualifying For A Mortgage

Consumers who filed bankruptcy , all debts that are part of the bankruptcy should be reflected on credit reports.

  • If there were 10 creditors as part of the Chapter 7 bankruptcy, all of the ten creditors should be noted that the creditors were part of bankruptcy on credit reports
  • However, there are many cases that credit reporting agencies do not report the discharged debts as part of the bankruptcy and the errors in your credit report will affect the mortgage process
  • A bankruptcy will drop credit scores by at least 100 points or more
  • This massive drop in credit scores is just a temporary drop and credit scores will increase as the Chapter 7 Bankruptcy ages
  • By not including a creditor as part of the bankruptcy discharge, it reflects that consumers are still owing that debt which can affect the mortgage process

Correcting Errors In Your Credit Report

If the debt that was included as part of  Chapter 7 bankruptcy petition has been discharged but the credit reporting agencies are not reporting as such, it reflects that the debt is after the Chapter 7 Bankruptcy.

  • Many lenders automatically disqualify borrowers with late payments after bankruptcy, foreclosure, deed in lieu of foreclosure, and short sale

If the debt does not have the verbiage that it is part of bankruptcy, lenders will see it that the borrower are currently late on that particular debt which means late payments after bankruptcy.

  • It is hard enough in trying to repair credit and improve credit scores and this erroneous reporting makes it much more difficult.
  • Never dispute derogatory and/or errors in credit report without consulting with loan officers.
  • Credit Disputes are not allowed during the mortgage process.

Credit Reporting Agencies

Credit Reporting Agencies

The three credit reporting agencies are the following:

Credit Bureaus record discharged debts that were part of the consumer bankruptcy’s discharge and reporting it as current bad debt, thus hurting the consumer from getting mortgage loans and other forms of credit.  Having these discharged bankruptcy debts being recorded as active debts can disqualify borrowers for a mortgage loan.

FTC Reveals 25% Of Consumers Have Errors In Your Credit Report

FTC Reveals 25% Of Consumers Have Errors In Your Credit Report

Recent studies conducted by the Federal Trade Commission revealed that 25% of consumers have errors in credit reports:

  • At least 10% of the consumers with errors on their credit report were errors that were serious enough to cause a dramatic impact on the consumer’s ability to secure credit or loans
  • Everyone should check their credit report on a regular basis to monitor their credit and to check for any errors
  • Everyone is entitled by law for an annual free credit report by each of the three credit reporting agencies; Transunion, Equifax, and Experian

For more information on this topic or other mortgage topics, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com.

Related> What Do Underwriters Look In Credit Reports?

Related> Minimum Credit Scores For Mortgage Programs

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