How a Credit Report Dispute Could Stop You From Buying a Home

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Have you ever had a disagreement with a creditor? If yes, you may want to think about how disputing that account could impact your plans to buy a home. You may not be able to get a mortgage if you have open disputed credit accounts. Here’s how to make sure you can seal the deal.

Borrowers may dispute items on their credit report if they disagree with the accuracy. Disputes regarding balance, rate, payments are most common.

These include:

  • Charge-off accounts (charge-off shows a due debt, but no payment due)
  • Collection accounts
  • Accounts with late payments in the past two years
  • Can also include any other credit account with “Dispute Status” reporting on the credit report

Consumers dispute accounts to improve their credit score, clean up their credit history or to improve their credit picture in most cases. Disputing an account is a measurable action to take, especially when the issue is due to theft or fraud. In those circumstances, a disputed credit account that was fraudulently opened would have no negative bearing with the mortgage lender.

But what if it is your account?

What if you disputed an account that is yours because you had a genuine disagreement with your creditor?  Or if you wanted to see if you could remove derogatory items?

A Red Flag When Home Buying

It may seem unfair if you feel you have a genuine dispute with a creditor on an account that is yours. But the truth is, when it comes to getting a mortgage, lenders don’t like to see disputed accounts because it shows a potential for future liabilities that may impact your ability to repay the mortgage. Therefore, disputed accounts must be removed from the dispute status before you can seal the deal with the home sale.

So if you do have any disputed accounts on your credit report, be prepared by getting your paperwork together. The lender will need a letter of explanation for the disputed accounts and documentation to support the claim of the dispute.

If you have credit accounts in dispute, you may also have to pay more cash in order to close on the house. If the sum total of all disputed credit accounts is equal to or greater than $1,000, you’ll have to pay the debt down to zero in order to remove the dispute status. For example, if a consumer has $5,000 in disputed credit accounts, they can settle with the creditor for an agreed-on amount as long as the creditor reports it as “no longer reported as disputed.” This action will satisfy the mortgage lender in issuing your loan.

If the dispute accounts total less than $1,000, the lender will require the buyer to contact the creditor to change the reporting status from “account in dispute” to “no longer reported as disputed.”

Homebuyer Credit Tips

  • Undispute all credit accounts before applying for a new loan to purchase a home.
  • If you have not found a home yet, before home searching, see if you have any accounts that need to be zeroed out. Your lender can help you go through your most recent copy of your credit report.
  • If possible, avoid disputing any credit accounts (other than for theft or fraud).

[Editor’s Note: If you’re in the process of applying for a home loan, checking your credit scores is an important part of the process. You can use a free tool like the Credit Report Card to get two free credit scores that are updated monthly.]

More on Mortgages and Home Buying:

 Image: Tetra Images

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  • Credit Experts

    Are you sure you’re getting good advice? Any dispute on your credit report could potentially hold up your mortgage.

  • Charlie M

    I am currently looking for a a house and when my credit score was ran an open account in collection came up. i called the collection office and they said it was a mistake and that it was under the wrong SS #. i was told that if i dispute this my credit score could go up but it can also hurt me. i asked the person from the collection office how long it takes and she told me its pretty quick process specially if they made a mistake. can this hurt me when trying to get a mortgage loan? what should i do?

    • ScottSheldonLoans

      You should it possible that the creditor to remove the liability completely because it is not yours. Disputing the account, if your lender is working with automated underwriting set forth by Fannie Mae and Freddie Mac will be an issue and will hold up a loan process.

  • ScottSheldonLoans

    Medical disputes for the purposes of getting a mortgage are determined by the automated underwriting the lender uses. If the automated underwrite requires these accounts to be zero balanced out then yes they would have to be cleared prior to closing escrow.Good Luck!

  • Gerri Detweiler

    Well hopefully they know what they are doing!

  • KinSC

    Is it okay to open a dispute between the time that the loan has been approved and when you close? I have an erroneous late payment that was in dispute, but I decided to cut my losses and withdraw the dispute so that I could submit the loan application, which came back as approved. It’s a month before closing now, if I reopen the dispute, will that delay the closing or will it be irrelevant since the lender already ran the credit and the late payment was reported at the time that the loan was approved?

    • Credit Experts

      It could potentially delay closing. Credit is checked again just before closing.

    • ScottSheldonLoans

      Yes, remove from the dispute status close on the loan then do any dispute related items “after the fact.”

  • Jason Taylor

    Will a remark about a credit dispute that I have already had removed from my report affect me getting approved for a loan?

    • Gerri Detweiler

      Possibly. We have heard of consumers who ran into problems because of a statement that didn’t correspond with the information in the report. It has usually been in the context of a mortgage where there is greater scrutiny.

  • Gerri Detweiler

    Maybe, maybe not. This recent article discusses disputes: What Really Happens When You Dispute Something on Your Credit Report?

    • cathie romero

      That didn’t answer the question. She said if you “undispute”.

      • Gerri Detweiler

        Cathie – in that article I talk about how a dispute may or may not affect your scores. Whether removing the dispute will affect your scores depends on whether it is in the first place, and that isn’t always clear.

  • Jean

    How do I stop a dispute once I already submitted it?

    • Gerri Detweiler

      Here is an article on that topic: How Do I Get a Dispute Off My Credit Reports?

    • ScottSheldonLoans

      Call you are servicer of the credit account in dispute and request that they take it out of dispute status.

  • cathie romero


    • ScottSheldonLoans


      All you do is call the creditor and remove the dispute status in conjunction with a mortgage application.

  • dustin

    I have 2 student loans (opened in 2004) that started with Direct loans and then Direct loans closed so the loans were transferred to U.S. Dept. of Edu. in 2012. Direct loans only reported to Transunion. and reported my Date of first Delinquency as may 2008
    The issue is that when the loans were transferred, U.S. Dept. of edu. they reaged the date of first delinquency to nov. 2011 (1year before they got the loans).
    I’ve disputed this twice and of course u.s. dept. of edu just verifies the info they have.
    I’ve called them and they said they Established the DOFD to 1 year b4 they got the loans b/c the loans had to have been in delinquency when they got them.
    How do I get this fixed? Transunion has removed the loans b/c they are past the 7 years threshold but Equifax and transunion won’t b/c U.S. Dept. of Edu just verifies the info they have.

    The loans were never brought current after the first DOFD in 2008

    • Gerri Detweiler

      You file a complaint with the CFPB. Be as clear and specific as you can in your complaint–it’s somewhat confusing as written here. Let us know what happens. The other alternative is to talk with a consumer law attorney to find out if you have a case for credit damage.

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