Is Credit Repair Needed To Qualify For Mortgage Loans


This BLOG On Is Credit Repair Needed To Qualify For Mortgage Loans Was UPDATED On February 6th, 2019

Credit repair is the process of correcting errors or attempting to remove derogatory credit items that is reflected on consumer credit report.

In this article, we will cover and discuss whether or not credit repair is needed to qualify for a mortgage.

Removing Errors On Credit Report

Is Credit Repair Needed To Qualify For Mortgage Loans if there are errors on the credit report? The answer is yes.

  • One should definitely remove derogatory information that is on their credit report immediately as long as it is legitimate
  • This can be done in a short period of time
  • However, many consumers try to remove legitimate derogatory information on their credit report
  • This can be done but consumers need to know that credit repair during the mortgage process can end up hurting them instead of helping

Is Credit Repair Needed To Qualify For Mortgage And Does It Work?

The three giant major credit bureaus are semi-regulated by the federal government.

  • Transunion, Experian, and Equifax are the big three credit reporting agencies
  • There is no doubt that credit reporting agencies make mistakes in reporting inaccurate information on consumers
  • An error on a consumer’s credit report can plummet a consumer’s credit scores
  • Errors can cause higher interest rates on credit and loans for the consumer
  • Every consumer should check their credit report periodically for errors
  • Make sure that they correct the errors by disputing the errors to all three credit reporting agencies
  • Consumers with valid proof documenting that the derogatory credit item or any credit item contains inaccurate information need to write a letter along with the proof to all three credit reporting agencies
  • Make sure to document and keep a copy of all of correspondences between yourself and the credit reporting agencies
  • Send all mail via certified mail
  • Once the credit reporting agencies gets receipt of credit dispute, they have 30 days to correct the error or validate debt

Removing Derogatory Credit That Belongs To You

Many people hire credit repair companies to remove derogatory credit items off their credit report.

  • There are thousands of credit repair companies in the United States that specialize in removing negative items off one’s credit report
  • Those who have recently filed bankruptcy or had a foreclosure, it is next to impossible to remove a fresh derogatory credit item off credit report
  • Anything a credit repair company does, one can do it themselves

How Does Credit Repair Work

Most credit repair companies use the credit dispute technique in trying to delete a derogatory item

  • Pretty much, the credit repair company will send dispute letters to the credit bureaus stating that the derogatory credit item does not belong to consumer
  • Credit Bureaus then sends letter to creditor reporting the questionable disputed tradeline
  • Creditors have 30 days to respond and if they do not send validation to the credit bureaus, the bureaus need to remove them from credit report

Credit Dispute

Even if the derogatory credit item is not consumers, each of the three credit bureaus need to contact the creditor who is reporting derogatory item. That creditor needs to respond validating their claim that the derogatory credit item is valid and your dispute is not valid.

  • If they provide documentation and/or proof that the derogatory credit item belongs to consumer, the derogatory credit item stays on credit report
  • If the creditor does not provide proof or does not respond, then each of the three credit bureaus need to delete the derogatory credit item off credit report by law
  • The credit bureaus will then send consumer a copy of new credit report stating the results
  • Results will be the disputed credit items has been deleted, or whether it will remain on report because the creditor verified the disputed item
  • This process is repeated over and over again until the derogatory credit item is removed
  • What credit repair companies are betting on is that the creditor will one day not respond back to the credit bureaus
  • Due to this technicality, the credit bureaus will eventually delete the derogatory item

Removing Derogatory Credit Items Off Credit Report

This technique of disputing derogatory credit items does work and there are relentless credit repair companies that will act on behalf of their credit repair clients and do a great job.

  • However, remember that fresh newer credit derogatory items are extremely difficult to delete because the creditor has the delinquent account readily available to them
  • Older derogatory credit items are easier to have it deleted because many creditors sell charge offs or aged delinquent credit accounts for pennies on the dollar

Is Credit Repair Needed To Qualify For Mortgage For Derogatory Deletion

Consumers can get a recent late payment or derogatory credit item removed or deleted. Once deleted, credit scores normally increases:

  • However, it is almost next to impossible to get a derogatory credit item or late payment that is less than one year old removed from credit report
  • The older credit derogatory item is, the easier it is to have it deleted from credit report
  • However, older derogatory credit items have very little or no impact on credit scores
  • Most times it is a waste of money in hiring a credit repair company to get derogatory items older than two years old removed from credit report
  • This is because it is too old to have any positive impact in boosting credit scores
  • If intentions of hiring a credit repair company is to qualify for mortgage, please think twice
  • Lenders do understand that people have periods of financial distress
  • Lenders understand that credit scores can suffer during periods of unemployment, medical issue, or divorce

Is Credit Repair Needed To Qualify For Mortgage To Qualify For Home Loan With Bad Credit

Home buyers can qualify for a home loan with bad credit as long as they have been timely on their payments for the past 12 months. .Is Credit Repair Needed To Qualify For Mortgage? Credit Repair is not required. Borrowers can have prior bad credit to qualify for mortgage.

  • Borrowers can have prior derogatory credit and open collection accounts and still qualify for FHA, VA, and Conventional Loans without having to pay off the old collection accounts
  • For those who have recently filed bankruptcy or had a foreclosure should start re-establishing their credit by getting several secured credit cards
  • Re-establishing credit with adding secured credit cards is a wiser choice instead of spending their money on hiring a credit repair company.

Is Credit Repair Needed To Qualify For Mortgage After Bankruptcy And Foreclosure

A bankruptcy and/or foreclosure will plummet credit scores by almost 200 points but this drop is not a permanent drop.

  • Credit scores will gradually increase over time
  • Getting new credit such as 3 to 5 secured credit cards, it will speed up improving credit scores
  • Each secured credit card after bankruptcy or after a recent foreclosure should boost up credit scores by at least 20 or more points
  • Credit scores will gradually improve as payment history on secured credit cards ages
  • I have seen people’s credit scores at 700 and higher just over a year after a foreclosure and/or bankruptcy just by them getting 3 to 5 secured credit cards

Credit Disputes During Mortgage Application Process

One of the worst things borrowers can do is dispute a derogatory credit item with a credit balance during the mortgage application process.

  • Borrowers cannot have a credit dispute with a credit balance of over $1,000 during the mortgage approval process
  • There is exemptions on medical collections
  • Borrowers with pending credit dispute with any credit bureaus during the mortgage application process, the mortgage process will be in suspense until that credit dispute is retracted
  • By retracting the credit dispute, credit scores will drop
  • Any credit dispute that gets retracted will affect a consumer’s credit scores
  • One recent credit dispute retraction from one of my clients has plummeted her credit scores by 80 points
  • Home Buyers planning on applying for a home loans now, or in the near future, do not dispute any derogatory information
  • Disputing a derogatory information prior to applying for a residential mortgage loan in the near future will hurt chances of getting a mortgage

Home Buyers who need to qualify for mortgage with a direct lender with no mortgage overlays can contact us at The Gustan Cho Team at 262-716-8151 or text us for faster response. Or email us at So next time there is a question Is Credit Repair Needed To Qualify For Mortgage, contact us first before going and spending money on things not needed to qualify for home loan.

This BLOG On Is Credit Repair Need To Qualify For Mortgage Was UPDATED On February 6th, 2019

Gustan Cho

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