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Items in dispute may not be in dispute at all!

Texas Consumer Credit - Wednesday, September 09, 2015
Completing the cycle of credit challenged client to closed borrower involves much more than writing dispute letters. Today I want to discuss removing dispute language after the investigation has been completed.

First, I would like to clarify that there is no way to avoid having dispute language populate on items that are being challenged on a credit report. Once an item has been challenged, the credit reporting agencies place a code of "XB" to that item. The appropriate language of “In Dispute” or “Customer Disputes this information” is then illustrated on the report.

The reason LP (Loan Prospector) & DU (Desktop Underwriter) rejects files that have items in dispute is because the "XB" code removes any score impact the disputed items may have on the overall score, potentially raising the consumer’s credit score temporarily.

This is common knowledge in Mortgage Lending but what is less known is how to determine if the dispute has been resolved. Here is where you have to read the fine print. Often, investigations that have been completed have language similar to those that are still active. The keys to determining if a dispute is still active are as follows

- When was the dispute initiated? (Data Furnishers have 30 days to respond to each inquiry)
- Does the language reflect a current or closed dispute?

If the dispute is resolved, the reporting code is changed from XB to XC or XH. The language you may then see may be similar to this: “Consumer Disputed This Information” or “Account in Dispute; Closed”. This ambiguous language signifies that the dispute has been resolved but the outcome was not favorable for the consumer. So as you review updated reports, look more closely and try running your findings again. You may be pleasantly surprised!

Most lenders require that any mention of a dispute be removed regardless of whether it is resolved or not. At times there is an exception if the account is classified as "medical"

Our protocol is to make sure that all disputes have been fully resolved and all dispute "remarks" or "comments" have been removed from the client's credit report before they are handed over to the lender ensuring a smooth transition and the best possible chance of the client being approved.

If you have any questions about this topic feel free to reach out to us at 1-800-742-7093 or 915-201-2604

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