Many consumers do not realize that disputing credit can raise credit scores. When an item on credit is disputed the bureaus, and in many cases the creditors, update a statement under the account. Disputing can raise credit scores but this increase may be considered false by mortgage banks. The statement reads “account info disputed by consumer” or “consumer disputes”. This can happen on both negative and positive accounts. The problem with these statements is they cause the account to be calculated differently and in most cases ignored by the FICO formula. This causes falsely inflated or if a positive account is in dispute the score can be falsely deflated. Unfortunately, many consumers don’t realize this and are shocked when they find out their actual credit score is completely different from what was assumed.
This discrepancy happens because the bureaus Experian, TransUnion, and Equifax are supposed to remove these dispute statements once they have investigated their validity, but many times they don’t actually do it. Unfortunately, for many loans active dispute statements will stop or block approval until they are removed. Banks know disputes cause false scores and normally want them removed to assess risk.
In many cases purchasers who are applying for a loan will falsely believe they are above a 620, 680,720, or 740 FICO score. They usually have disputed items on their own or they have gone to a credit repair company that did a sloppy job and left the dispute statements on the accounts. Many bankers hand in the application and hit a brick wall with the bank until the disputes are removed. Once these statements come off the scores can drop and usually the loan applicant will miss out on better pricing or even have the loan completely denied. This can be devastating to the applicant as well as disappointing to the realtor and banker that have put in a lot of work to get their client their dream home.
Although credit scores are not the only qualifier a bank looks at they are an important component. Having a reputable credit expert analyze credit at least 6 months prior for those who are planning on purchasing or refinancing a loan can be of great value. A credit expert may also identify a dispute on a good account which could be falsely dropping the scores. If this is the case the removal of the dispute statement can add points and could save applicants hundreds of thousands of dollars if they can meet a better loan threshold.