La Jolla Real Estate Blog: Disputing a Charge on Your Credit? Read this!

The Los Angeles Times and California Association of Realtors are reporting that credit account disputes on your credit report could stall mortgage applications!  For more information read below:

Some consumers with exceptional credit reports and high FICO scores are being denied mortgages by Fannie Mae's automated underwriting system because there is a notation in the credit report that the consumer has disputed an item.

Under the Fair Credit Reporting Act, consumers are guaranteed the right to dispute inaccurate information on any account in their credit files.  Once a consumer disputes an item in their credit report, a notation to this effect is made in the file.  Until the notation is removed, most credit-scoring system generally will not factor the disputed item into the computation of the consumer's score.

However, with the recent surge in companies claiming to "clean up" and "erase" blemishes on consumers' credit reports, some lenders are finding that these credit companies are disputing accurate, but negative items, hoping the consumer will qualify for a loan before the dispute is resolved.

Applications that are denied through Fannie Mae's automated underwriting system, which is used by virtually all lenders doing business with Fannie Mae, are sent back to the lender for manual underwriting.  It is then up to the lender to determine and document whether the disputed information is accurate and underwrite the borrower's credit accordingly.

Fannie Mae, however, says it is reviewing its policy, so maybe there's a chance for a change.  In the meantime, you might ask your lender what their policy is toward credit disputes.