The Fair Credit Reporting Act allows anyone to dispute derogatories in their credit file. When you initiate the dispute process, the credit bureaus (Equifax, Experian, and TransUnion) will send inquires to your creditors asking for verification of the items in dispute. Next, the credit bureaus will add a statement to the accounts being disputed: “Accounts in dispute”. These statements will almost ensure that your ability to borrow will be hindered.
Here are the mechanics of your hinderance. A disputed account is removed from the credit scoring model. This in turn will create a false credit score. When the mortgage underwriter reviews your file, they are instructed to downgrade any approval by the automated underwriting system (AUS) that is utilized by Fannie Mae or Freddie Mac. Before any progress is made, the statements, “Accounts in Dispute” must be removed from your credit report. This will ensure that your credit score is a correct reflection with all accounts taken into consideration. The underwriter will repull your credit report and rerun the AUS.
How do you alleviate this stress? Preparation! Check your credit report on a regular basis. Credit bureaus do not act quickly. Make sure that all disputes have been completed and all verbiage regardng the dispute is removed. Ultimately, your credit report is your responsiblity, ensure you give yourself enough time to “fix” any credit issues.