BUYING A HOME, CREDIT DISPUTES CAN BE PROBLEMATIC
If one is interested in buying a home I always talk to them about credit. I do this before I pull credit because I want them to have the highest score possible. Having the highest score possible may not be necessary when buying a home but it could impact the interest rate. Therefore I like to have a discussion about what one thinks is on his/her credit.
Often when I'm talking to someone about credit and sometimes after I actually pull a credit report I see a dispute on the credit report. My experience is more often than not the dispute is not of much significance but it is important for a home buyer to know a dispute can cause a problem in getting approved for a mortgage loan. I see disputes on lines of credit that have no balance, some that have a small balance and others with a significant balance. Some disputes are on closed lines of credit that have long since been paid off but the dispute is still being reported. In general if a dispute is on a credit report that means the credit bureaus have ignored that item in the scoring basis. As a result the score reported is not necessarily accurate.
Underwriting guidelines change from time to time. When a disputed item showed up on a credit report we used to have to ask the borrower to get the dispute removed and then had to re pull credit. Two things happened, one was an additional inquiry on the credit and the other is if the disputed item was a negative account then the score would drop below the original score.
More recently the guidelines have been updated to where the disputed item may not be as important, if it has a small balance, zero balance or is current. Guidelines are different between different loan programs and lenders. In some cases the dispute is still of significance.
Important to know and best practice is DON'T DISPUTE AN ITEM FOR THE SAKE OF DISPUTING IT. If you intend to pay the account or come to some agreement then having a dispute report on your credit is not a good thing. You may not be happy, but saying you dispute an item because you are not happy is not helpful. Also, IF YOU DO DISPUTE AN ITEM THEN FOLLOW UP AND REMOVE THE DISPUTE FROM YOUR CREDIT REPORT to avoid any problems down the road. If you file a dispute you need to follow through and advise the credit bureaus that you are satisfied and the dispute needs to be removed from your report. Most often when I see a dispute on a credit report the credit holder knows what it is and why; they just never realized they had to REMOVE the dispute.
BUYING A HOME? DO YOURSELF A FAVOR AND MAKE SURE YOU DON'T HAVE AN OLD DISPUTE ON YOUR CREDIT.