Help!! Pre-approval now on the line due to disputed collections

[Anonymous]

Here's the rundown, it's a lot, but I'll try to be brief:

• Disputed two collection accounts in December of 2017. One was succesfully removed, the other remained. The one that remains is about three years old and has not had any payment activity in the same number of years. 
• The remaining collection account has had the disputed notes on it for the last year.
• Somehow, we have succesfully been approved by three different banks for a mortgage, despite the notation on the account. We even got down to underwriting/appraisal on one home but unfortunately, it didn't appraise and we hit a stalemate.
• The bank we were previously working with has changed hands, and we've had to reapply. Now, the dispute notes are being called into question and preventing them from issuing a pre-approval letter. (Note: I'm not casting doubt, I get that this is a thing. It just surprised us because we hadn't even realized it was a problem, until it was.)

My questions/thoughts:

• I was under the impression that if a collection account came back validated, that account was then removed from its suspended (for lack of a better term) status and would resume being factored into your score immediately. If this is the case, would this collection account have already be factored into the score, even though the remarks were just removed a few days ago? We're trying to gauge if we should be anticipating a big dip in the score. Is there really a condition in which your accounts are actively being disputed (not factored in) and when the previous dispute process is just being documented via the remarks (factored in.)
• After the dispute notes were removed, I pulled all three credit reports to confirm that no notes remained. I then reactivate the MyFico subscription the following day to see what score was reporting. The collection account was obviously still listed, but did not have any dispute notes. Is this score accurate? We are already planning for the small hit due to the inquries, but are hopeful that the dip due to the collections being factored has already happened. MyFico reps stated that it should be accurate, but we've got a lot riding on this and I'm looking for reassurance or a reality check.

Oh yea, we found a home we actually love and are racing against the clock. This will be 6+ months of the active home buying search rollercoaster and we finally found another home we love...only to hit this roadblock.

Any helpful guidance is appreciated and I'm happy to help fill in any blanks I may have ommitted. The middle score is about 10 points above the threshold, so I'm hoping it won't dip much more.

[Anonymous]

• Disputed two collection accounts in December of 2017. One was succesfully removed, the other remained. The one that remains is about three years old and has not had any payment activity in the same number of years. 
• The remaining collection account has had the disputed notes on it for the last year.
• Somehow, we have succesfully been approved by three different banks for a mortgage, despite the notation on the account. We even got down to underwriting/appraisal on one home but unfortunately, it didn't appraise and we hit a stalemate.
• The bank we were previously working with has changed hands, and we've had to reapply. Now, the dispute notes are being called into question and preventing them from issuing a pre-approval letter. (Note: I'm not casting doubt, I get that this is a thing. It just surprised us because we hadn't even realized it was a problem, until it was.)

My questions/thoughts:

• I was under the impression that if a collection account came back validated, that account was then removed from its suspended (for lack of a better term) status and would resume being factored into your score immediately. If this is the case, would this collection account have already be factored into the score, even though the remarks were just removed a few days ago? We're trying to gauge if we should be anticipating a big dip in the score. Is there really a condition in which your accounts are actively being disputed (not factored in) and when the previous dispute process is just being documented via the remarks (factored in.)
• After the dispute notes were removed, I pulled all three credit reports to confirm that no notes remained. I then reactivate the MyFico subscription the following day to see what score was reporting. The collection account was obviously still listed, but did not have any dispute notes. Is this score accurate? We are already planning for the small hit due to the inquries, but are hopeful that the dip due to the collections being factored has already happened. MyFico reps stated that it should be accurate, but we've got a lot riding on this and I'm looking for reassurance or a reality check.

Oh yea, we found a home we actually love and are racing against the clock. This will be 6+ months of the active home buying search rollercoaster and we finally found another home we love...only to hit this roadblock.

Any helpful guidance is appreciated and I'm happy to help fill in any blanks I may have ommitted. The middle score is about 10 points above the threshold, so I'm hoping it won't dip much more.

[RobertEG]

Collections are not removed from scoring based on filing of a dispute.

A collection is not a tradeline of the consumer, it is the reporting of attempts by a third party to collect on a delinquent debt.

It is only certain information reported under  tradelines that are temporarily excluded from scoring during the period of a pending dispute.

[Anonymous]

Hmmm...now I'm really thrown for a loop. The MLO, and other resources I've seen, stated that you can't get a truly accurate score unless anything previously disputed comes out of dispute status and subsequently factored back into the score. This is all just one big mess and we've been waiting to have her run our credit again just to make sure the score isn't about to dip again since the notations were removed...

[Anonymous]

Open collections will be a problem with mortgages, even if there is an active dispute.

This is because the collection agency can potentially sue and win a judgement, worst case scenario including lawyers fees, and that judgement can be forcibly enforced throwing your whole financial picture into disarray.

I'm not saying that no mortgage company will work with you with open collections, but at the very least you will be limited.

If the collections are paid, and the tradelines are not currently being disputed, the FICO score showing on myfico will likely be the one your mortgage lender will see.  There are caveats.

1. There are many fico scores.  The lender could be using any one of them, or multiples of them. 
2. I don't know for certain that all scores available to lenders are actually shown on myfico.com. 
3. Lenders have other scoring models available to them besides those from FICO.  FICO is the most popular in the industry.
4. Scores can change daily or more frequently.  Whenever a tradeline is updated, the score changes.  There are thresholds that impact scores.  Those thresholds can be the amount of available credit, the age of an account, the amount of debt, the average age of all accounts, and probably a few others that come to mind.  Generally, if nothing negative is happening (accounts closed, amount owed not going up, new tradelines appearing, new consumer-generated commercial inquiries reporting) the score will not go down.

I would suggest working with a mortgage broker.  They sometimes have deals that are hard for the general public to find, and if they are active, they have a feel for what credit profiles will be successful with which lenders.  On one house purchase, we worked with a broker who gave us a lead to a mortgage company, but then that broker turned out to be a worthless schmuck so we went to that company directly.  The bank had us write a letter explaining why we would not work with that mortgage broker (he cost us time and money unnecessarily, and we almost lost the opportunity to buy the house we wanted), and ended up giving us a deal that was either the same or slightly better and he lost out on the commission.  Just trying to make the point that _if_ a mortgage broker turns out bad, you aren't stuck.  I did buy one other home, with a mortgage broker involved, and that mortgage turned out to be a better deal than we would have found on our own. 

Our real estate agent recommended the broker that was good.  The home builder recommended the one that was bad.

[Anonymous]

That's helpful, thanks for the tips. The amount stated is not going up, new tradelines have been opened, but it is not paid. The MLO did mention looking into a PFD and we were considering it since the amount is relatively small, but our fear was that it may drop the score even more.

You've given me good things to think over tonight!