When an individual decides to review their credit and attempt to work on improving it they either challenge the validity of the credit history with the bureaus or directly with the creditor. This process may cause consumer dispute statements (CDS’s) to appear on credit. Initially, when a negative account is disputed it will be taken out of the score formula or be calculated differently for a period. This change in calculation can cause increases in credit scores until verification by the creditor and the credit bureau is complete. The same applies to good accounts but usually if a good account is disputed scores can drop.
When the initial verification is complete the account will be corrected or verified as accurate. If the consumer continues to dispute the account a notation is added that the consumer disagrees/disputes. This can continue to alter the score and removal is more complicated.
Most loans will be kicked into manual underwriting if a CDS is pending or unresolved on credit. Most loan professionals (LP’s) are aware that a CDS can inhibit their ability to get a loan closed but may not realize the reasoning behind it.
Lenders want to price loans correctly with the true level of risk reflected. An accurate score prior to pricing and extending financing is of primary concern which is why these CDS’s can be important.
A quality credit repair company will explain this to LP’s when changes to a client’s credit are complete. They will also advise the LP when new reports can be pulled for credit score accuracy. By conferring with the LP they remove CDS’s that can cause issues for approval and give the green light for all to advance forward with loan application. Unfortunately, there are many dispute factory type credit repair companies and even consumers that randomly dispute with no strategy for how these dispute notations will impact loan approval and successful timing of a closing.