Home > Credit 101 > How a Credit Report Dispute Could Stop You From Buying a Home

Comments 46 Comments
Advertiser Disclosure

Disclaimer

Have you ever had a disagreement with a creditor? If yes, you may want to think about how disputing that account could impact your plans to buy a home. You may not be able to get a mortgage if you have open disputed credit accounts. Here’s how to make sure you can seal the deal.

Borrowers may dispute items on their credit report if they disagree with the accuracy. Disputes regarding balance, rate, payments are most common.

    Call now for a FREE consultation
    CALL 844-639-6956

    These include:

    • Charge-off accounts (charge-off shows a due debt, but no payment due)
    • Collection accounts
    • Accounts with late payments in the past two years
    • Can also include any other credit account with “Dispute Status” reporting on the credit report

    Consumers dispute accounts to improve their credit score, clean up their credit history or to improve their credit picture in most cases. Disputing an account is a measurable action to take, especially when the issue is due to theft or fraud. In those circumstances, a disputed credit account that was fraudulently opened would have no negative bearing with the mortgage lender.

    But what if it is your account?

    What if you disputed an account that is yours because you had a genuine disagreement with your creditor?  Or if you wanted to see if you could remove derogatory items?

    A Red Flag When Home Buying

    It may seem unfair if you feel you have a genuine dispute with a creditor on an account that is yours. But the truth is, when it comes to getting a mortgage, lenders don’t like to see disputed accounts because it shows a potential for future liabilities that may impact your ability to repay the mortgage. Therefore, disputed accounts must be removed from the dispute status before you can seal the deal with the home sale.

    So if you do have any disputed accounts on your credit report, be prepared by getting your paperwork together. The lender will need a letter of explanation for the disputed accounts and documentation to support the claim of the dispute.

    If you have credit accounts in dispute, you may also have to pay more cash in order to close on the house. If the sum total of all disputed credit accounts is equal to or greater than $1,000, you’ll have to pay the debt down to zero in order to remove the dispute status. For example, if a consumer has $5,000 in disputed credit accounts, they can settle with the creditor for an agreed-on amount as long as the creditor reports it as “no longer reported as disputed.” This action will satisfy the mortgage lender in issuing your loan.

    If the dispute accounts total less than $1,000, the lender will require the buyer to contact the creditor to change the reporting status from “account in dispute” to “no longer reported as disputed.”

    Homebuyer Credit Tips

    • Undispute all credit accounts before applying for a new loan to purchase a home.
    • If you have not found a home yet, before home searching, see if you have any accounts that need to be zeroed out. Your lender can help you go through your most recent copy of your credit report.
    • If possible, avoid disputing any credit accounts (other than for theft or fraud).

    [Editor’s Note: If you’re in the process of applying for a home loan, checking your credit scores is an important part of the process. You can use a free tool like the Credit Report Card to get a free credit score that is updated every 14 days.]

    More on Mortgages and Home Buying:

     Image: Tetra Images

    Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

    Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

    Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

    Hello, Reader!

    Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

    Our People

    The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

    Our Reporting

    We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

    The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

    In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

    Our Business Model

    Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

    Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.



    Your Stories

    Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

    Thanks for stopping by.

    - The Credit.com Editorial Team