How Do FHA Loans Handle Disputes on Credit Reports?
If you have ever disputed anything on your credit report, even if it has been resolved, you may be wondering if you will be able to qualify for an FHA loan. The answer may be yes! We are experts in FHA loan approvals; in fact we are in the TOP 10 Teams in the industry for FHA purchase closings!
First of all, it’s important to understand how a lender views disputes. When you dispute anything on your credit report, that item is excluded from your FICO credit score, which could mean that your credit score is artificially higher than if the dispute did not exist.
As a lender, when we see disputes we consider a few different factors related to those disputes. Depending on the loan program, disputes are handled differently. Specifically with an FHA loan, we do not have to pay attention to the disputes if the disputed account has a zero balance or is marked as “resolved” or “paid in full.” If there is a balance, it must be less than $1,000 and more than 24 months must have passed since the dispute was made.
We can also ignore disputed accounts of a non-purchasing spouse and in the case of disputes resulting from credit card theft and identity theft. Keep in mind that you must have thorough documentation in the case of theft. We can also ignore all disputed medical collections.
So, what if you have an account that you disputed in the past but are now current and paying as agreed? We can ignore non-derogatory accounts even if they were once disputed if the balance is zero or any late payments happened more than 24 months ago.
What can you do? If you are planning to apply for a mortgage in the near future, consider refraining from disputing any credit accounts, unless it’s a case of theft, fraud, or other criminal activity. Make sure you get extensive documentation regardless and keep good notes.