Disputing an account may not take it out of the score
‘Let's dispute it and take it out of score.’
Loan officers miss this a lot and so do consumers.
Many believe – and try to use the tactic of – “Hey, let’s dispute this account online. Put it in dispute to take it out of the credit score.”
Things have changed since this tactic began over 12 years ago. The mortgage world responded and now it's just not that simple or effective. Unfortunately, this fallacy persists in the mortgage industry.
Disputes can also kill loans
Today, there is the additional problem of accounts with dispute wording killing a loan program:
"I have a lot of people hiring attorneys to dispute everything from kingdom come and back. And then they come to us and want to do a conventional loan, and it ain't happening.
I just spent about $700 of my company's money to remove a ton of disputes that somebody paid a couple thousand dollars to put in there in the first place that actually did nothing."
– Senior Loan Officer
Reinvestigation vs. in dispute
There’s an assumption that when you write a letter or dispute something online, which creates a 30-day investigation (called a reinvestigation under the Fair Credit Reporting Act), that you are putting the account “in dispute” and removing its effect on the credit score.
But reinvestigation and “in dispute” are two different things.
Disputing an account means that in 30 days an investigation will be completed, in 30 days or less. At the end of that investigation, the account can look exactly like it looked before or have some changes the investigation produced. But it's wrong to assume that because it was disputed, that the account will be “in dispute.”
This goes back to the Metro 2 code where there are very different types of disputes: disputed by consumer, dispute resolution pending, dispute after resolution. One of those may or may not be on the account when it’s over.
Don't assume that disputed equals out of score
And, that brings us to our main points:
- Not every disputed account will remain in dispute when the investigation is completed.
- Not every account that is in dispute when the investigation is completed is out of the scores.
Disputing accounts has a valid function when used correctly
Disputing information at the the credit bureaus and with creditors is sometimes warranted and of value to the borrower.
There is a valid use but always with the loan program in mind – and after a thorough analysis of the full credit file and the borrower's situation, goal and time frame.
Mortgage professionals should very wary of so-called credit repair companies that advise disputing all negative accounts.