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Disputes on your credit could potentially be big problems for your mortgage loan in todays lending climate.

Picture this: You have superior credit scores, good equity and debt ratios and want to take advantage of record low interest rates.  No problem, right?

Not so fast.  One of your credit accounts have a notation on the credit report, "account in dispute".  Maybe it was a medical payment that you made, maybe it was paid as agreed but the balance was incorrect.  It can be any number of reasons you dispute the account.  It is your legal right to do so.

Now instead of rocketing through the underwriting process, you are no longer eligible for automated underwriting and it can sometimes be tough to have your file manually underwritten.  Many underwriters just don't want to take on the extra liability without the warm and fuzzy embrace of a computer program telling them the loan is ok.

So why is the dispute such a big deal?  When an account is disputed the account becomes invisible to the scoring models that are used by the 3 credit repositories to calculate your credit scores.  Because of this, many credit repair companies use disputes to artificially increase a borrowers score.  While this account is in dispute, the negative effect of this account don't count against the current scores.  But if the account is found to be valid later, or the dispute is dropped, then the scores will then drop again with the updated information.  Fannie,Freddie, and HUD want the accuracy of the credit report to be in tact and no longer will allow an account with a dispute to participate in the standard process. 

Unfortunately, this leaves good customers who are not trying to trick the system with fewer options, possibly higher rates  and sometimes no options as well. 

So be cautious if you are doing some credit repair, it could leave you ineligible for a mortgage loan until the dispute process is completed.  Make sure any credit repair company you are working with understand just because your scores have gone up that their work is not over.  They will need to permanently correct the credit and make sure that none of your accounts are left in a dispute status.  Creditors are wise to this as well so you will normally find it difficult to get them to work with you to remove a dispute.   

As always, if you have anyone that needs assistance with a residential refinance or purchase transaction send them my way.  ~Tristan 

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