There are a lot of things that can throw a wrench into buying your dream home – having a dispute on your credit report is one of them.
What Is a Credit Dispute?
A credit report dispute happens after you’ve found an inaccuracy on your credit report and have reported it to get corrected or removed. You have the right to dispute any item on your credit. Credit bureaus are required by law to provide you an accurate credit report.
Having an error on your credit report is actually not that uncommon. According to a 2012 study by the Federal Trade Commission, one in five Americans has some kind of error on their credit report. Sometimes these errors are as minor as an incorrect address or as large as a stolen credit card.
When you have reported an inaccuracy on you credit report, the credit reporting agencies will label it as “in dispute.” When you have an item on your credit report that is being disputed, your report will be temporarily inflated.
Why Does It Matter to a Mortgage Company?
When you have an inflated credit score because something is being disputed, mortgage lenders may not approve your mortgage application. Because your credit score is artificially inflated to compensate for the error, it makes your score an inaccurate representation of your credit. Lenders can require you to have the dispute resolved before you can be approved for certain types of mortgages.
What Do You Do if You’re Disputing Your Credit?
Getting an inaccuracy corrected on your credit report can take months to resolve. This can put you in a difficult position if you’re looking to buy or refi. The inaccuracy on your credit report could make it so you only qualify at a higher interest rate. You may have to delay closing on your loan until the issue has been resolved.
When deciding when to dispute an error on your credit report or when to make any other major financial change, you may want to talk with a Home Loan Expert first. They’ll help you to determine if there will be a big difference in what you’ll qualify for before and after you dispute the error. It may be that locking in the current interest rate will cost you less in the long run than waiting until after you’ve resolved a disputed the error on your credit report.
There are some credit disputes that mortgage lenders can ignore, depending on the type of mortgage. There are also certain disputes that can be ignored with a letter from the creditor or a police report. These factors vary depending on your credit score and what type of mortgage you are trying to get.
When it comes to credit and credit disputes, it’s not always black-and-white. Everyone’s credit and financial histories are different. That’s why it’s very important to talk to an expert who can take a look at everything and give accurate information.
There are a lot of things to consider when preparing to apply for a mortgage, especially, when you are a first-time home buyer. Start by checking out your credit report, to make sure everything is in proper order.
Have you ever had to dispute something on your credit report? In the comments below, add your advice for someone who’s going through the same thing.
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