Somewhere over the course of trying to improve your credit, you may have heard that you can dispute accounts that have a negative history. Here’s what you should do instead.
The very first thing you should do when learning about an inaccuracy is to contact the creditor. For example if a late payment is being reported but you know you’ve made all payments on time, contact them to explain the problem, ask where you can send any supporting documentation, and ask how quickly the error will be reported correctly. This is the most direct and effective method of fixing errors quickly.
Disputes are effective when something on your report is inaccurate and you cannot reach the creditor, or are not getting any help. You can go to the three credit bureaus and file a dispute. Once this is done, the creditor will have 30 days to respond to the credit bureaus to verify the account.
How do disputes hurt your mortgage application?
Disputes alert the credit bureaus that there may be incorrect information on your credit report. With an unresolved dispute, they may not factor the account into your credit score. While an account with a negative history would typically lower your score, omitting that account could artifically raise your score. At first glance, that appears to help your application, doesn’t it?
No! Lenders know that disputed accounts may prevent them from getting an accurate score and will almost always require that the dispute be removed. If you’re trying to buy a home, or refinance to access your equity and you need to remove disputes first, this means delays in the closing process.
Even worse, your quoted interest rate may be based on an artifically increased score. Once the disputes are removed, your score can go down and you may not qualify for terms as favorable as before. Worst case scenario? You might not qualify at all.
Dispute comments on your credit report may not always be removed, so be sure to follow up until everything is resolved.
Many people fall into the trap of disputing accounts and then leaving things alone, thinking that the dispute will fix everything. To be sure, always follow up with the creditor or the credit bureau if you don’t get a response. It may take multiple tries, but your credit will be in better shape because of it. You can request a copy of your credit report from each credit bureau for free, annually.
