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New Contributor
SashaDixon
Posts: 66
Registered: ‎01-17-2014
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Dispute removal for FHA approval on home loan

So, I was just told on Monday by my LO that the "consumer disputes this account" statements need to come off my CR from all three agencies ib order to be pre-approved with an FHA loan. All of these disputes statements were added in 2011 when I noticed I had 34 accounts showing on my CRs and only 20 of them were true accounts. 14 of them were removed as they were duplicates, but they never removed the dispute statements. All of the accounts were from 2008-2010 and I paid off a couple after the duplicates were removed. 5 were still showing "in dispute" statements on TU and EQ and 6 on EX. Two of these were CO with 0 balances due to fall off this August. Two are paid off completely, one 2 years ago and the other 1 year ago (but both of these will fall off in 2017). The other two I still owe on, but a minimal amount ($844 total). I called EX and spoke with a very nice lady (Andrea you are the best!) and she got all of them removed while I was on the phone with her, and I called and left a message with Dorothy at EQ and she called me back within the hour to say she had removed them from my EQ report and would be sending me a verification letter in the mail. TU was a little trickier, they put in a "request for removal" on all statements and I was told it could take 30 days for them to fall off. All in all the dispute removal process wasnt near as horrible for me as for some of the other posters on here. (Thank God!!) 

 

I actually have a question, just wanted to give some info first to help my question get answered the best. Will my score drop because of these dispute statements being gone? My scores were 670ish with all three bureaus before, but my LO seems to think they were "inflated" scores due to them being pulled out of the scoring model. What I dont understand about that is this: my scores were HORRIBLE when I added the disputes (low 500s) and were not raised when the disputes were put on there. My scores have only started raising due to 2 COs coming off (October 2013 went from 628 to 684) and three new tradelines being added (7/2011, 8/2012, and 3/2013). I also have a student loan that was rehabbed in 12/2012. I was really feeling good about pulling myself out of the pits of bad credit when I hit the 600's!!! Now I'm afraid I will lose the ability to buy when I was just starting to see a light at the end of the tunnel. Can anyone give me any insight?



Starting Score: EQ: 645 TU: 663 EX: 630
Current Score: EQ: 690 TU: 658 EX: 675
Goal Score: 700


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Super Contributor
ShanetheMortgageMan
Posts: 8,252
Registered: ‎09-28-2007
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Re: Dispute removal for FHA approval on home loan

Supposedly disputes accounts aren't factored into the credit score and in several situations I've seen the scores decrease when disputes on derog accounts have been removed.  It really just depends on your credit report as a whole and the full details of each account that the disputes are being removed from.  It's like a snowflake, everyone is going to be a little different.

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SashaDixon
Posts: 66
Registered: ‎01-17-2014
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Re: Dispute removal for FHA approval on home loan

*Sigh* I guess I will just have to wait and see then. Thanks for responding though. :smileyhappy:



Starting Score: EQ: 645 TU: 663 EX: 630
Current Score: EQ: 690 TU: 658 EX: 675
Goal Score: 700


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Established Member
Cher6476
Posts: 12
Registered: ‎08-20-2012
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Re: Dispute removal for FHA approval on home loan

Just thought I would share, not that the situation is the same but we just went through this. My husband had 2 accounts (on was a paid charge off, the other one unpaid, both about 6 years old) that needed the dispute comments removed. We are in the process now of trying to get a mortgage in his name. Our LO said that the disputes needed to be removed, which the bank took care of. However, he did warn us that sometimes the score do drop because of if. His explanation was that disputed accounts are not factored into the score. However, these 2 accounts were not in an active dispute, they were disputed over a year ago and only the comments remained.

 

Well, sure enough after the comments were removed the bank pulled the scores and all three dropped. On the bright side I went back and checked and the only other thing that happened within the time frame was that there was one credit card that had a 1% balance that had been paid to $0. We added a small balance back and had them recore again and the points were back.

 

I don't know how much this will help in your situation but I thought I would share what happened with us. Good luck!

Moderator
Revelate
Posts: 9,486
Registered: ‎12-30-2011
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Re: Dispute removal for FHA approval on home loan

[ Edited ]

Cher6476 wrote:

Just thought I would share, not that the situation is the same but we just went through this. My husband had 2 accounts (on was a paid charge off, the other one unpaid, both about 6 years old) that needed the dispute comments removed. We are in the process now of trying to get a mortgage in his name. Our LO said that the disputes needed to be removed, which the bank took care of. However, he did warn us that sometimes the score do drop because of if. His explanation was that disputed accounts are not factored into the score. However, these 2 accounts were not in an active dispute, they were disputed over a year ago and only the comments remained.

 

Well, sure enough after the comments were removed the bank pulled the scores and all three dropped. On the bright side I went back and checked and the only other thing that happened within the time frame was that there was one credit card that had a 1% balance that had been paid to $0. We added a small balance back and had them recore again and the points were back.

 

I don't know how much this will help in your situation but I thought I would share what happened with us. Good luck!


From what I've heard from the various mortgage experts here: Desktop Underwriter (piece of software foisted on them by one of the GSE's for underwriting mortgages that will meet their criteria) can't determine the difference between a tradeline in dispute, or one simply with a dispute comment.  Shane is correct in stating that disputing a tradeline (or public record / collection / what have you) can cause it to be discounted in at least FICO '04 from numerous reports.

 

Personally I see that as a failure of technology implementation; however, I have also heard there are historical reasons for it related to fraud prevention but I don't know first-hand precisely what occurred or when.

Starting Score: EQ 561, TU 567, EX 599* (12/30/11, EX lender pull 12/29/11)
Current Score: EQ 04 673, EQ 8 707, TU 720, EX 702* (09/02/14, EX older)
Goal Score: 700 on EQ '04 (01/01/15)


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SashaDixon
Posts: 66
Registered: ‎01-17-2014
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Re: Dispute removal for FHA approval on home loan

Pulled my scores today and all three dropped. EX dropped by 15 points, but EQ dropped almost 60 and TU dropped a full 100!!! I dont understand!!! All of these disputes were almost 3 years old and my score never went up when I put the disputes in!! How can they take away points when I was never given any for them to take away??? And how long is this going to take my score to rebound?



Starting Score: EQ: 645 TU: 663 EX: 630
Current Score: EQ: 690 TU: 658 EX: 675
Goal Score: 700


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New Contributor
SashaDixon
Posts: 66
Registered: ‎01-17-2014
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Re: Dispute removal for FHA approval on home loan

Also, I saw in another thread on here that only OC accounts would effect the drop in score. Only two out of the six were OC accounts and due to fall off in August. And yet I have a 60 and 100 point drop in scores from two 300 dollar charge offs? That makes no sense.



Starting Score: EQ: 645 TU: 663 EX: 630
Current Score: EQ: 690 TU: 658 EX: 675
Goal Score: 700


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Super Contributor
ShanetheMortgageMan
Posts: 8,252
Registered: ‎09-28-2007
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Re: Dispute removal for FHA approval on home loan


SashaDixon wrote:

Pulled my scores today and all three dropped. EX dropped by 15 points, but EQ dropped almost 60 and TU dropped a full 100!!! I dont understand!!! All of these disputes were almost 3 years old and my score never went up when I put the disputes in!! How can they take away points when I was never given any for them to take away??? And how long is this going to take my score to rebound?


If the accounts weren't in dispute, then your scores may have stayed where they currently are, so those were probably the points that were taken away.  The scores will improve over time as long as your future credit history is clean.  They'll also increase faster if the past delinquent items come off the credit report.  If you have any credit card debt, then paying that down to a minimum will help your scores as well.

New Contributor
SashaDixon
Posts: 66
Registered: ‎01-17-2014
0

Re: Dispute removal for FHA approval on home loan

Thanks for your reply Shane. I'm just really discouraged right now as I have been trying to get all of this cleaned up for the past 3 years and it seems my scores never went anywhere now. Maybe up 50 points from horrible 520's. I'm also becoming very frustrated with mortgage brokers as we have seen three different ones since July of 2011 and all had different things to tell us to do with regards to these old accounts. One told me to pay everything off, I paid over half and spoke to another lender and he said dont touch any. We asked him about the disputes in March of 2013 and he said they were no big deal, just let them fall off. The current mortgage lender we are speaking to is the one who told me that the disputes needed to come off so I did it and my scores tanked. It seems I cant win. There is only 884 left to pay on the two collections all others are zero balances. Im going to call after we get taxes back and see if I cab PFD on both of those. Seems like all I can do. :smileysad:



Starting Score: EQ: 645 TU: 663 EX: 630
Current Score: EQ: 690 TU: 658 EX: 675
Goal Score: 700


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Super Contributor
ShanetheMortgageMan
Posts: 8,252
Registered: ‎09-28-2007
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Re: Dispute removal for FHA approval on home loan

For FHA, disputes now only need to be removed if:

 

... the cumulative outstanding balance of disputed "derogatory credit accounts" of all borrowers is equal to or greater than $1,000, the mortgage application must be downgraded to a “Refer” and an underwriter is required to manually underwrite the loan.  If the cumulative outstanding balance of disputed derogatory credit accounts of all borrowers is less than $1,000, a downgrade is not required.  Certain accounts are excluded, such as disputed medical accounts & disputed derogatory credit accounts resulting from identity theft, credit card theft, or unauthorized use (however in the latter a letter is needed from from the creditor, or other appropriate documentation to support the dispute, such as a police report disputing the fraudulent charges).

 

"Derogatory credit accounts" are defined as disputed charge-off accounts, disputed collection accounts, and disputed accounts with late payments in the last 24 months.  Disputed derogatory credit accounts of a non-purchasing spouse in a community property state are not included in the cumulative balance for determining if the mortgage application is downgraded to a “Refer”.  "Non-derogatory disputed accounts" are excluded from the $1,000 cumulative total.  "Non-derogatory disputed accounts" include disputed accounts with zero balance, disputed accounts with late payments aged 24 months or greater, and disputed accounts that are current and paid as agreed.

 

Full details at: http://ficoforums.myfico.com/t5/Mortgage-Loans/FHA-changing-collection-account-judgments-amp-dispute...


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