Removing Credit Disputes

by martyna
Removing Credit Disputes

Removing Credit Disputes Prior To Starting The Mortgage Process

Credit disputes are not allowed during the mortgage process.

  • All non-medical credit disputes or non-medical credit disputes that is newer than 24 months from the date of last activity need to be removed prior to the mortgage process
  • Medical credit disputes and non-medical credit disputes that are older than 24 months old are exempt from retraction
  • Non-medical credit disputes with zero balance are exempt from retraction
  • If you have outstanding collection accounts and the total aggregate outstanding balance is less than $1,000, the disputes do not have to be removed
  • Capital Lending Network, Inc. will guide our borrowers and viewers the quickest and fastest way in removing credit disputes

There are instances where consumers have a difficult time in having the credit bureaus removing credit disputes. Not removing credit disputes may cause delays in getting pre-approved and getting the mortgage process started.

Pre-Approval Letter With Outstanding Credit Disputes Are Null And Void

A loan officer should never issue a pre-approval letter with outstanding credit disputes unless the disputes are exempt credit disputes.

What is a pre-approval letter containing outstanding credit disputes is void

  • A pre-approval letter with outstanding credit disputes is null and void
  • Unfortunately, there are still loan officers who issue pre-approval letters with outstanding credit disputes
  • Mortgage processors should carefully review each borrower’s credit report and make sure there are no credit disputes prior to submitting the file to underwriting
  • A mortgage underwriter will automatically suspend and kick back a file with outstanding credit disputes

We will explain why removing credit disputes prior to a loan officer issuing a pre-approval letter is so important.

How Not Removing Credit Disputes Can Backfire On The Borrowers

Whenever a consumer disputes a derogatory credit tradeline to each of the three credit bureaus, the credit bureaus will automatically take out the negative scoring factor on the disputed credit item.

  • So what this means is by disputing a derogatory credit tradeline the credit scoring model will automatically treat the credit tradeline in question like it does not exist
  • Therefore, every time there is a dispute on a derogatory item, the consumer’s credit score will increase
  • On the flip side, if the consumer requests the credit dispute to be removed, then the credit bureaus will add the negative factor back in the credit scoring formula
  • Therefore, the consumer credit scores will drop
  • It can drop significantly because once the dispute is removed and the derogatory item remains the same, the credit scoring model will treat it as a brand new derogatory credit tradeline
  • This is the exact reason why loan officers should never issue a pre-approval letter with outstanding credit disputes

The borrower needs to wait until all credit disputes have been removed before getting a pre-approval letter issued.

Credit Repair During The Mortgage Process Can Do More Damage Than Good

Credit repair is not necessary for borrowers with prior bad credit in order to prepare to qualify for a mortgage.

Can credit repair during the credit process do more harm than good

  • Credit repair can do more damage than help homebuyers prepare for a mortgage
  • All outstanding credit disputes, with the exception of exempt disputes, need to removed
  • Credit disputes during the mortgage process will halt the mortgage underwriting process
  • Older derogatory credit tradelines such as collection and charged-off accounts, late payments, and other derogatory credit tradelines that are older than two years old have little to no impact on credit scores
  • Credit disputes that are older than two years old are exempt and do not have to be removed
  • Lenders fully understand people can go through rough times where they have interruption in their employment, loss of business, health issues, or other extenuating circumstances
  • Interruption of income leads to late payments which damages the consumer’s credit profile
  • You do not have to pay outstanding collections and/or charged-off accounts to qualify for a home mortgage
  • Lenders want to see what you have done to rebuild and reestablish your credit after your period of bad credit, bankruptcy, and/or a housing event
  • Lenders want to see that you have rebuilt and reestablished your credit
  • Lenders want to see timely payments in the past 12 months

As long as you have rebuilt and reestablished your credit after having prior bad credit, you should get an approve/eligible per automated underwriting system (AUS) and qualify for a home mortgage.

HUD Guidelines On Credit Disputes During The Mortgage Process

Here are the general FHA Guidelines On Credit Disputes During The Mortgage Process:

  • Credit Disputes on medical collection accounts are exempt from retraction
  • Consumers can have credit disputes on all medical collection accounts no matter how large the balance is
  • Outstanding balances and the number of credit disputes do not matter on medical collection accounts
  • Borrowers can qualify for a FHA Loan with credit disputes on non-medical collection accounts as long as the outstanding collection accounts has a zero balance reporting on the credit report
  • Borrowers CANNOT qualify for a FHA Loan if they have any credit disputes on any charge-off accounts, late payments, and other derogatory credit tradelines unless they are older than two years old

If the total dollar amount of all outstanding non-medical disputes is under $1,000, the credit disputes do not have to be removed.

How Deletion Of Outstanding Collection Accounts Can Help Borrowers With High Debt To Income Ratios

Borrowers with high debt to income ratios and larger outstanding collection balances may need to see if they can do a settlement on the outstanding collection accounts removed by doing a pay for delete with the creditor. Jammi Cash of Gustan Cho Associates is a loan officer specializing with helping borrowers with prior bad credit and a credit expert. Jammi Cash said the following concerning qualifying for a mortgage with large outstanding collection accounts:

How Deletion Of Outstanding Collection Accounts Can Help Borrowers With High Debt To Income Ratios

  • Medical collection accounts and charge off accounts are exempt from the hypothetical debt to income ratio calculations on the 5% rule of taking 5% of the outstanding collection account balance
  • However, if you have outstanding non-medical collection accounts with outstanding unpaid balances of $2,000 or greater, then under HUD Guidelines On Collection Accounts requires mortgage underwriters to take 5% of the outstanding unpaid balance and to be used as a hypothetical borrower’s monthly debt
  • This holds true even though the borrower does not have to make any payments
  • Removing the outstanding collection accounts off the borrower’s credit report will solve the lender not counting the debt to income ratios
  • Many borrowers with larger outstanding collection accounts and higher debt to income ratios try to dispute derogatory credit accounts hoping it will get deleted
  • However, there are times where the creditor and/or credit bureaus will give you a very difficult time when you try to retract a credit dispute

In the following paragraphs, we will show you how to remove credit disputes off your credit reports and how you can do it yourself.

How To Remove Credit Disputes Quickly To Qualify For A Home Mortgage

The following step by step instructions explains on how to remove credit disputes. Lenders want to see the verbiage “Consumer Disputes This Account” off the borrower’s credit report.

First Step In Getting Started With The Dispute Process:

  • The first step in removing credit disputes is to order credit reports from Experian and Equifax (this requirement has been discontinued in 31 states)
  • Transunion does not require consumers to get the Transunion credit report
  • Consumers will need the Report Number on the reports provided by and
  • Note the names and account numbers of the accounts that have the Dispute status on your credit report

Second Step In Removing Credit Disputes:

  • Make The Calls To Each Of The Credit Bureau Reporting Disputes
  • Each credit bureau is independent of one another
  • Contact the bureaus that has the disputes reporting on your credit report
  • The telephone numbers provided are for the dispute department that you will need to contact to speak with to accomplish this task
  • Once a representative answers your call, give the credit consultant the account number of the credit tradelines that are under the dispute
  • Find out whether the dispute was placed with the creditor or the credit bureau
  • If the dispute was placed with the credit bureau, request that you no longer dispute the credit tradeline and ask them to remove them
  • If the dispute was placed with the creditor, tell the credit bureau representative that you want to remove the credit disputes
  • However, the chances are that you may need to contact the creditor directly and have them remove the account from being in dispute status
  • Request to the creditor that you want them to update the credit bureaus that you are no longer disputing this. Your credit report should be updated with all disputes removed in five to seven days

You can also request your credit disputes to be removed by writing to each of the credit bureaus reporting them:

Dispute Letter Instructions:

What are the instructions regarding the letter of dispute

Step 1:

  • Copy and Paste the text below this box into a word processing application such as WORD

Step 2:

  • Copy and Paste the credit bureau name and address that you are sending this letter to
  • If you are sending this letter to a creditor then you will need to look up the name and address for the creditor

Step 3:

  • Type out the name and account numbers of the accounts in dispute

Step 4:

  • Type out your personal information in the appropriate places on the form provided below

Step 5:

Make sure to include a copy of the front and back of your drivers license, social security card, and current utility bill with your dispute

Step 6:

  • Mail and/or fax your dispute letters to the credit bureaus and/or your creditors in dispute


Attention: ___________

Address: _________

City, State, ZIP: ___

The following accounts are being listed on my credit report as being in dispute. I no longer wish to dispute this account and consider it resolved for now. Please remove this statement from the following accounts:

{{{List Account Name and Number}}}

Thank you for your help regarding this issue.


Name: __________________________________

Social: ___________

DOB: ___________

Address: __

City State, ZIP: ___________

If you have any questions with the instructions above, please contact your assigned loan officer at Capital Lending Network, Inc.