Disputed Accounts – Devil In The Details

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Chances are your credit report has had incorrect data on it at one point.  Perhaps a late payment or a medical collection you didn’t know about.  Disputing such errors is common.  However, did you know a disputed credit report can impact your ability to get a home loan?

Disputing Info on Your Credit

Many use credit report disputes to argue errors on their credit report.  Disputing data on your credit is a good thing.  However, disputed credit data shows on your credit.  In fact, a special “Consumer Disputes” note appears on your credit profile after you dispute.  This often puts strain on the home loan process.

The automated systems lenders use see disputes on your credit report.  Ironically, disputing hides the disputed trade lines from key systems in the loan process.   These opposing realities create a problem for lenders.

Disputed Credit and Your Home Loan 

Disputed credit is tough on the home loan process for many reasons.   However, disputed credit’s best known mayhem comes from automated underwriting issues.  Typically, mortgage lenders use a handful of automated underwriting systems industry wide.  These systems pre-underwrite your loan.  In most cases, automated underwriting must approve your file in order for your home loan to fund.

Issues arise when automated underwriting systems see a disputed item on your credit.  Currently, the automated systems used by lenders handle the presence of disputed accounts differently.

However, regardless of what system is used hurdles pop up when the automated mortgage systems know a disputed credit item is excluded from the loan process.  Ironically, in some cases the disputed credit items need to be factored in by the very system that cannot see them.  Suffice it to say, disputed credit trade lines often halt the loan process when overlooked during your pre-approval.

Disputed Accounts – Proceed Carefully 

Make sure your loan officer understands the gravity of disputed credit trade-lines for those little letters “D-I-S-P-U-T-E-D” have might powers!

By Jeremy House

 

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