Disputing Collections? Watch This Before You Apply for a Mortgage

Let’s take a closer look at disputing accounts on your credit report, because this is where a lot of buyers get tripped up.

Some people think disputing a negative account is a quick fix, and in the short term, it can be. When you dispute an account, the credit bureaus stop counting it in your score for a while, which can give you a temporary score boost.

But that boost doesn’t last. If you don’t actually resolve the account, the bureaus will start counting it again after a few months. The dispute notation, however, will remain — and that can cause problems when you apply for a mortgage.

Not all disputes create the same issue. Lenders ignore medical collections and accounts with a zero balance. But with other accounts — especially if you have several disputes or only a few credit accounts — a lender may require you to remove the disputes so they can get a more accurate credit score.

FHA loans allow a little more flexibility. Lenders can ignore disputes if the total disputed balance is under a thousand dollars, not counting medical accounts, zero-balance accounts, and accounts with no late payments in the last two years.

And if you do need to remove a dispute, you’ll usually have to contact the credit bureau showing it on your report. That process can take 30 days or more, which matters a lot if you’ve already signed a purchase contract.

The key is to deal with these issues early, so nothing slows you down later in the loan process.

And remember — it’s always okay to ask. We’re here to help you get home.