In this guide, we will cover how to remove credit disputes on your credit report. Credit disputes is not allowed during the mortgage process. Many of you are reading this article because you are either trying to get pre-approved for a mortgage or are in the mortgage process. There are many instances where loan officers will overlook credit disputes during the mortgage process. Mortgage underwriters will suspend any mortgage loan file with credit disputes until the credit disputes have been retracted.
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Something like a credit dispute may seem very minor and simple and easy to remove. But that is often not the case. No loan officer should issue a mortgage loan pre-approval to any borrowers with credit disputes on their credit reports.
Credit Disputes That Are Exempt From Disputes Being Removed
Non-medical disputes with a total aggregate outstanding unpaid collection account balance of over $1,000 and/or charge-off accounts need to be removed prior to the mortgage process. Mortgage processors cannot submit files with outstanding credit disputes to underwriting.
The mortgage underwriter will suspend the file and kick it back to processing. Not checking for credit disputes by both the loan officer and/or mortgage processor is one of the biggest reasons there are delays in the mortgage process and can delay the closing.
Medical disputes, non-medical disputes that are older than two years old, and non-medical disputes with zero balances are all exempt from retraction. If the total aggregate outstanding unpaid collection account balance is under $1,000, they are exempt from retraction and do not have to be retracted. Gustan Cho Associates has written this step-by-step guide on How To Remove Credit Disputes.
Credit Repair Companies Can Do More Damage Than Good
Credit repair is not required nor recommended for homebuyers with bad credit. Do not spend hundreds or thousands of dollars on credit repair if you are planning on doing so just for the sake of qualifying for a mortgage.
You can qualify for a mortgage with outstanding late payments and charged-off accounts without having to pay them off at Gustan Cho Associates.
Credit repair can often do more damage for mortgage loan applicants than good. Whatever a credit repair agency can you, you can do it yourself at no cost with the proper guidance of Gustan Cho Associates. Remember that you can qualify for a home mortgage with bad credit, outstanding collections and charged-off accounts, repossessions, late payments, and other prior derogatory credit, BUT lenders want to see rebuilt and reestablished credit with timely payments in the past 12 months.
How To Remove Credit Disputes During The Mortgage Loan Process
There are thousands of credit repair companies in this country. There are also countless books and online courses teaching consumers how to repair their credit. The most common method with credit repair is by disputing derogatory credit items to the three giant credit bureaus; Experian, Equifax, and TransUnion.
Consumers try to get their derogatory item deleted by writing a letter disputing the validity of the derogatory credit item to either the creditor and/or credit bureaus and/or both. Once the creditor and/or credit bureaus receive the credit dispute letter, they have 30 days to contact the creditor and request the validity of the consumer’s dispute and send proof to the credit bureau.
The credit bureau will examine the response of the creditor. They will check to see if the credit dispute is valid or not. Then make a decision of whether to either delete the derogatory credit item from the consumer’s credit report. Or let the derogatory credit item remain on the consumer’s credit report because the creditor has confirmed that the credit has justified their bad credit reporting.
How Do Derogatory Credit Tradelines Get Removed From Credit Disputes
If the creditor does not respond or fails to provide sufficient evidence that the derogatory item is valid, the derogatory credit item will get removed by the credit reporting agency investigating the credit rating dispute. The above steps are how the credit dispute process works. However, there are many instances where the credit bureaus will still leave the verbiage the consumer is disputing on the credit report. This often causes major problems for borrowers applying for a mortgage.
Reasons Consumers Dispute Derogatory Credit Tradelines
Again, millions of consumers will go through credit repair in hopes of removing the derogatory credit items from their credit reports and improving their credit scores.
Many home buyers who had prior bad credit go through credit repair in hopes of removing their derogatory items from their credit report in hopes of improving their credit scores so they can qualify for a home loan. Unfortunately, credit disputes will backfire on borrowers. This is because there are specific mortgage guidelines when it comes to credit disputes and the mortgage process.
You cannot have credit disputes during the mortgage process unless the retraction is exempt. Medical collections, non-medical collections that are older than two years since the date of last activity, and non-medical collections with zero balances are exempt from retraction. If the total aggregate balance of your collections is less than $1,000, they are exempt from retraction. Do not dispute any derogatory credit tradelines unless you have solid facts on paper prior to and/or during the mortgage process.
HUD Guidelines On Credit Disputes And The Mortgage Process
HUD Guidelines on credit disputes are very specific. In this paragraph, we will discuss the general FHA Guidelines On Credit Disputes and The Mortgage Process. Credit Disputes on medical collection accounts are exempt.
Consumers can have credit disputes on all medical collection accounts. Outstanding balances do not matter and still qualify for an FHA loan. Consumers can qualify for an FHA loan with credit disputes on non-medical collection accounts as long as the non-medical collection accounts have a zero balance.
Consumers CANNOT qualify for an FHA loan if they have any credit disputes on any charge-off accounts. Consumers cannot qualify for an FHA loan if they have credit disputes on non-medical collection accounts if the total of the outstanding balances is higher than $1,000. If the total aggregate balance of the outstanding collection accounts is under $1,000, then the credit disputes do not have to be retracted.
Consequences And Risks On How To Remove Credit Disputes
HUD does not require you to pay off outstanding collection accounts to qualify for an FHA loan. Medical collection accounts and charge-off accounts are exempt from debt-to-income ratio calculations. However, if you have outstanding non-medical collection accounts that have outstanding unpaid balances of $2,000 or greater, then FHA Guidelines on Collection Accounts require that 5% of the outstanding unpaid balance needs to be used as a hypothetical monthly debt. This holds true even though the borrower does not have to make any payments.
Removing the outstanding collection accounts of the borrower’s credit report will solve the lender not counting the debt-to-income ratios. This is because deleting collection accounts cannot be found since they are not public records. Many borrowers with larger outstanding collection accounts and higher debt-to-income ratios try to dispute derogatory credit accounts by settling with the creditor via pay-for-delete.
There are times when the creditor and/or credit bureaus will give you a very difficult time when you try to retract a credit dispute. We will explain in this step-by-step guide how to remove credit disputes from your credit reports and how you can do it yourself.
How To Remove Credit Disputes Off Credit Report: Fast Track
This rapid correction method on how to remove credit disputes can help consumers who need to get the verbiage of “Consumer Disputes This Account” statements that are showing on their credit reports removed from an account quickly This can take anywhere from 30 minutes up to 2 hours to accomplish.
What You Need to Get Started:
- Get your Credit Reports directly from Experian and Equifax (this has been discontinued in 31 states) (TransUnion does not require this)
- You will need the Report Number on the reports provided by the credit bureaus from Experian.com and www.Equifax.com
- Note the names and account numbers of the accounts that have the Dispute status on your credit report
Make The Calls:
- Once you have found this information you will need to call the credit bureaus that is showing the credit disputes
- The telephone numbers provided are for the dispute department that you will need to contact to speak with to accomplish this task
During the conversation, you will give the representative of the credit bureau the account number that is being disputed. You will also need to ask if the dispute has been placed by the credit bureaus or the creditor and/or company.
WARNING: Reaching a human at each of the credit bureaus will be next to impossible. Gustan Cho Associates has a step-by-step guide on how to reach a human credit bureau representative. Please take a few minutes to read this popular step-by-step guide on reaching a human representative. Click This Link HOW TO REACH A HUMAN AT THE CREDIT BUREAUS
ASK THEM TO REMOVE THE DISPUTE!
Original Creditor Dispute:
- If you find that the account was put into dispute by the creditor, you will need to contact the creditor directly
- Ask them to remove the account from disputed status and to update the credit bureaus with the information that this account is no longer in dispute
- To ensure that the account has been successfully removed from Dispute Status you can call the above-listed numbers to find out the status
- The above process of removing the credit disputes usually takes 5 to 7 days to be completed
Sign up for Credit Karma. There is no fee for this. You can check your credit scores and credit report on Credit Karma at no cost. Credit Karma will also send you an email alert if there are any changes to your credit report.
Conventional Method on How to Remove Credit Disputes
The second way how to remove credit disputes is by completing the form that is listed below and faxing it to the credit bureaus and the creditors and requesting that they remove the credit disputes.
Credit repair experts recommend that you send this to both the credit bureaus and the creditors. The fax numbers listed may not be active, we recommend that you still mail a copy to the bureaus via certified mail as well.
The credit dispute process for removing derogatory credit tradelines can take anywhere between 30 to 45 days to complete but works well if the issue needs to be addressed but is not an urgent matter yet.
Dispute Letter Instructions:
Step 1: Copy and Paste the text below this box into a word processing application such as WORD.
Step 2: Copy and Paste the credit bureau name and address that you are sending this letter to – if you are sending this letter to a creditor then you will need to look up the name and address for the creditor.
Step 3: Type out the name and account numbers of the accounts in dispute.
Step 4: Type out your personal information in the appropriate places on the form provided below.
Step 5: Make sure to include a copy of your driver’s license, social security card, and current utility bill with your dispute.
Step 6: Mail and/or fax your dispute letters to the credit bureaus and/or your creditors in dispute.
The above are the steps on How To Remove Credit Disputes on your own. If you are in the middle of the mortgage process, your loan officer can help you with retracting your credit disputes.