This year I decided to enter the world of responsible adulthood and buy a house. A life-long renter, this was a big deal for me, and I spent several months getting mentally, emotionally, and fiscally ready. I saved my money for a down payment. I became intimately familiar with my credit report. I paid down my credit cards to get the highest possible credit score. While I was at it, I used a variety of tools, such as Quizzle and my credit card’s credit monitoring service.
In the course of my conscientiousness, I read in several places that disputing items on your credit report will often result in a creditor delete the item – especially items long-ago paid – as they have nothing to gain from putting resources toward proving to credit bureaus the information is accurate. They have their money already, right?
It made sense to me, so I took a few very old debts that I had some issues with (for instance, one debt was showing up on my report twice, under two different account numbers) and lodged a dispute with some creditors from debts over 3 years old in an effort to get them to disappear. A couple of them did disappear. A couple did not.
In the meantime, rates were low, the market volatile, and a great purchase opportunity came my way. I decided it was time to get my first-ever mortgage! So I applied. Everything went great. I was told to supply proof of income, residency, assets and a few other necessary items for underwriting purposes.
Oh, and by the way: Get these disputes off your credit report before we can give you a loan.
OK, how do I do that? Well, legally the disputes are supposed to be resolved within 45 days. So I thought, fine, it’s been at least four weeks since I made my last dispute. I’ll just wait. Right?
Wrong. Six weeks later and two disputes were still lingering. Much calling and wrangling with people (who spoke very poor English) ensued.
You see, it doesn’t matter that they are SUPPOSED to resolve in 45 days. Often they do not, and how do you then lodge a complaint or investigation without causing even more delays to your ultimate goal of securing home financing?
For the next three weeks my life became a frustrating odyssey of faxing, phone trees and credit pulls. And I’m not even sure how a regular person would do this, as I have access through my job to frequent credit pulls that give dispute details that are often not available through other consumer report monitoring services.
Trust me, you don’t want to go through this. I even had a creditor tell me it was not possible for them to send me a letter to show the dispute was resolved because “we don’t have a letter like that.” Unbelievable. I just had to hope he would tell the credit bureaus as he promised. He was sure to let me know that there was no guarantee when the bureaus themselves would reflect the information.
In the end, all my work paid off and I am now the proud holder of a fully approved and legally funded mortgage.
Ever vigilant to share with you, dear reader, tips and tricks on all things finance or mortgage related, I dug into the depths of this finance fiasco to learn more about this issue. I learned from Quicken Loan Credit Guru Aaron Edelman (who was invaluable in helping me resolve my disputes) that ever since Fannie Mae upgraded their automated underwriting guidelines in December 2009, disputes on credit reports must be removed, or the current payment history be proved invalid. To prove that a debt be invalid, you must submit proof to the underwriters, who use industry-regulated “disputed tradeline guidelines” in their determination.
Why are disputed accounts a problem to underwriters? According to Aaron, “Disputed accounts could be excluded from the FICO score calculation; thereby artificially inflating the credit score.” In other words, when a dispute registers on your report, underwriters are flagged that your score is not a TRUE score.
I wanted to know from Aaron how common my experience is among other potential borrowers. “A lot of people get the bad advice to dispute stuff.” He said. Not necessarily stuff that is really wrong, but things that might just be sort of hazy and lingering from your past. “There are entire companies that dispute things to try to ‘fix’ credit,” he added.
So let my tale of frustration serve as a warning! By all means dispute items on your report that you KNOW you have written documentation to prove wrong. But if you plan on applying for a mortgage soon, don’t make iffy disputes, even if there are official deadlines on dispute time! Your creditors may not care. And your lender will NOT give you a mortgage until all disputes are removed or resolved.
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