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Loan Officer Training-Credit Disputes During Mortgage Process
The easiest and fastest way of re-establishing credit and boost your credit scores is to add new credit. You do not have to hire a credit repair company and pay high dollars for credit repair. In many instances, credit repair does more damage than good. Let’s go over a few case scenarios:
1. You do not have to pay outstanding collections and charge off accounts to qualify and get approved for a mortgage.
2. You CANNOT have credit disputes on non-Medical collections, charge-off accounts, late payments, and other derogatory credit tradelines during the mortgage process.
3. You need to remove all non-medical collection and charge off credit disputes as well all other credit disputes on derogatory credit tradelines.
4. Example of derogatory credit tradelines include late payments, repossession, bankruptcy, foreclosure, deed-in-lieu of foreclosure, short-sale, judgments, tax-liens, child support and alimony default, and other public records.
5. Medical collection accounts, collection accounts with zero balance, and if the sum of all outstanding collection accounts are under $1,000, credit disputes are exempt.
9. Credit disputes that are older with credit tradelines that are older than 24 months are exempt from removing the dispute. However, many lenders will have lender overlays that no matter how old the date of last activity is, all credit disputes need to be removed.
What is Behind Why Lenders Do Not Allow Credit Disputes:
The reason why mortgage lenders do not allow credit disputes during the morgage process is because when a consumer disputes a derogatory credit item, the credit scoring algorithm system automatically triggers the derogatory credit item to be non-existent. What this means is that the credit scoring system negates the derogatory credit item from the credit scoring model and therefore the derogatory item is temporarily not used to derive to the credit score. This enables the credit score to go up. When you retract the credit dispute, the algorithm from the credit bureaus factors the derogatory credit tradeline back into the credit scoring model thus the credit score will go down.
Attached are some popular guides that may help you understand the above content more in detail:
https://gustancho.com/how-credit-disputes-affect-mortgage-process/
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How Credit Disputes Affect Mortgage Process
How Credit Disputes Affect Mortgage Process: You cannot have credit disputes during the mortgage process. Retracting disputes will lower scores.
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