Credit repair companies often dispute accounts to improve credit scores. Sometimes those same disputes must be removed from the credit report to receive a Fannie Mae and Freddie Mac automated underwriting system (AUS) approval. Why? Because disputes hide credit. When the dispute is removed, negative credit may return. Check with CreditXpert and use their What-If Simulator tool to see if the removal of a Dispute will affect credit scores.
The entirety of direction to follow for Disputes in the Fannie Mae Selling Guide for disputes on a credit report is below.
When the credit report contains tradelines disputed by the borrower, DU will first assess the risk of the loan casefile using all tradelines, including those disputed. If DU issues an Approve recommendation using the disputed tradelines, no further documentation or action is necessary. DU will issue a message specific to this scenario.
If DU does not issue an Approve recommendation when including the disputed tradelines, DU will re-assess the risk without using the disputed tradelines. If DU is then able to issue an Approve recommendation, the lender must investigate the tradelines to determine whether the borrower is responsible for the accounts or if the account information is accurate or complete.
The monthly payments for the disputed tradelines must be included in the debt-to-income ratio if the accounts belong to the borrower.
Note: Tradelines reported as medical debt are not shown in the disputed tradeline message. Therefore, lenders are not required to investigate disputed medical tradelines.
The following scenarios are examples of when a loan receiving an Approve/Eligible recommendation with the disputed tradeline(s) excluded from DU's risk assessment would be eligible for delivery as a DU loan:
The following scenario is an example of when a loan receiving an Approve/Eligible recommendation with the disputed tradeline(s) excluded from DU’s risk assessment would not be eligible for delivery as a DU loan:
To find out how the removal of a dispute will affect your clients credit score, check what removing the dispute will do to a credit score at all 3 bureaus with the CreditXpert What-If Simulator available through your credit reporting agency.
Directions for client to follow are on the right. Note: Removing a Dispute does not always change the credit score.