There are a lot of reasons to avoid credit repair companies. They usually don’t live up to your expectations, you end up with a lot of money out of pocket and typically, they end up doing more harm to your credit than good. A big downfall of these companies that most people don’t take into consideration is one or more “dispute remarks” ending up on your credit report, which could be a detriment.
When you work with a credit repair agency they send communications to the three major credit bureaus monthly and sometimes weekly disputing items on your credit report. These disputes could be collections, late payments, mistakes etc. When this happens, the credit bureaus put “dispute remarks” on your credit report. These remarks can be worded in a number of ways, with most usually stating that the “consumer disputes this account information”. Once a dispute is initiated the bureaus have 30 days to investigate the account to determine its accuracy. During the investigation time, which may not take the full 30 days, the disputed account is excluded from the scoring model. Once the investigation is complete however, there is no guarantee that the remark will come off your report. After the bureaus send their investigations to the creditors, the creditors will report that account with a “dispute flag” which also creates a remark. When the investigation is finished the creditor would then have to report that account to the bureaus without the dispute flag in order to have the remark removed. Unfortunately this is not something they always do. And since the remark is still there and the lender does not know if the dispute is still under investigation, they do not know if the account is actually being factored into the scores or not.
Then there are the people who try to “trick” the system this way…if a collection or a late payment is in dispute and excluded from the scoring model it can temporarily boost your credit score. But please note it is only temporary…very temporary. As soon as you stop paying the credit repair company their monthly fee, they will stop the communication with the bureaus and anything that has come off of your credit report or was excluded from the scoring model will show up again. Once that collection or late payment is factored back into your scores, it can have a significant negative impact on your overall credit score.
When you apply for a mortgage loan your lender is going to run your credit report through an automated underwriting system. If there is a dispute remark, that underwriting system is going to pick it up and give the report an “ineligible” until the remark is removed. Getting a dispute remark removed is not always an easy task, especially if you have been using a credit repair agency and there are multiple dispute remarks on your credit report. If the automated underwriting system has approved the loan based on the credit scores, the dispute remark will still have to be removed before they will completely approve the loan.
If an account is not being factored into the scores because it is in dispute and the dispute remark is removed the account will then be factored into the scores. If this account is derogatory in any way, once that remark is removed you could see a dramatic drop in your scores. Without the original scores the loan could again be denied because of the drop in the scores.
Best answer to this? If you have true inaccuracies on your credit report, dispute them yourself directly with the bureaus. Be sure you do not dispute accounts immediately prior to or during your loan process as this will cause delays due to the remark showing up on your credit report. If you do have a dispute remark on your credit report and you are going through the loan process you can work with you lender who will then work with their credit reporting agency to help have the remarks removed.
If you have questions please feel free to contact Mindy Leisure