Dispute Statements & Notations on Credit

In the past few years financing rules have become more rigid when it comes to consumer dispute notations on credit.

What is a consumer dispute statement?

When a consumer believes that information of  disputes information on credit a dispute note will be placed on the account in question. Initially, when a negative account is disputed it may very well be taken out of the score formula or at least cause increases in credit scores until verification by the creditor and the credit bureau is complete. This will give an inflated score during the time that the creditor and bureau are reviewing the dispute. Each credit bureau has a legal time-frame to address disputes.

This also applies to good accounts that have been disputed. If the account is a positive trade line the pending dispute could have the opposite impact and reduce scores. When the initial verification is complete the account will either be corrected or verified as accurate. At that point the dispute notation will be removed and the account will then be fully factored into the score. If the consumer continues to dispute the account after the initial verification a notation is placed stating the consumer disagrees and disputes the information on the credit report – this can also alter the score.

While accounts are in dispute most loans will not be approved

If you’re seeking financing or a mortgage, most lenders will not approve the loan or it will be kicked into manual underwriting if a consumer dispute notation is pending or unresolved on credit. Lenders are very aware of how these statements can change scores and most have rigid restrictions about what they will accept when approving financing. Most mortgage professionals are aware that a consumer dispute notation can inhibit their ability to get a loan closed but don’t really know why. Lenders want to price loans correctly with the level of risk the borrower reflects. An accurate score prior to pricing and extending financing is their primary concern which is why removing and/or resolving consumer dispute notations on accounts prior to getting a loan is so important.

Frivolous Consumer Credit Disputing and Its Impact on Credit Scores

Excessive disputing of accounts can occur when consumers randomly dispute information on credit or when factory type “credit repair clinics” are hired. When information on credit is disputed multiple times with no concern for the validity of the reasoning behind the argument, it can cause a red flag to be placed on the account by the credit bureaus.

Legally the bureaus can ignore further investigation once this happens. The open “consumer dispute statements” posted on credit by this type of process can cause, at best, a much longer underwriting process and in the worst case, denial of mortgage approval. Consumer dispute statements impact the account in question differently than an account in normal standing. This is because the majority of banks do not want to approve funding when they know the credit score is being portrayed inaccurately.

A high quality credit repair company will explain this to loan officers when they have completed changes to an individuals credit and will remove any dispute notations before giving the applicant approval to begin the mortgage process. Unfortunately, there are many dispute factory type credit repair companies out there and even consumers that randomly dispute information with no strategy or foresight into how these dispute notations will impact the loan application. Mortgage professionals need to make sure the lender will approve financing if they plan on submitting an application with these open statements on credit. If a loan officer pulls a credit profile and sees consumer dispute notations they should make the applicant aware of the need to have these notations removed or resolved. In many cases it is quite difficult and confusing for the layman to address these issues on credit.

Making sure credit is analyzed with future financial goals in mind is a MUST before taking an action that can foil those plans and limit a consumers options for a better quality financial life.