If you want to raise your credit score before applying for a mortgage, one thing you might be thinking about doing is disputing a missed payment on your credit line. Whether or not this is a good idea depends on the timeline for your mortgage application.
If you successfully complete the dispute before you initiate the application, then the dispute itself will no longer be active. As your score would be higher as a result of removing the offending item, it could help your application.
But filing this type of dispute shortly before you apply for a mortgage—or after you apply for one—could cause problems for your application.
This may surprise you, because you will see your credit score go up after you file a dispute. It will stay higher if it is resolved in your favor. But if it is not, then it will drop again.
But what you may not be aware of is that mortgage companies can see that there is a dispute in progress. That means that they may have deeper insights into your credit situation than you would expect.
How disputes are handled depends on what type of home loan you are applying for:
- Conventional loans: You can still be approved for a conventional mortgage if you have an active dispute. But it is less likely that you will be approved with one on your file.
- FHA loans: If the dispute is on a credit balance(s) more than $1,000 combined, then FHA requires the dispute to be removed in order to reveal the true credit score.
In both cases, you are adding complexity to the mortgage process, and potentially harming your chances of approval. So, what seemed like a good idea may not be worth it after all.
What can you do to avoid this? It comes down to timing. If you can get the disputes fully settled prior to beginning the mortgage process, then it won’t come up during the mortgage review. The dispute puts a band aid on the credit score, but getting the account fully resolved will truly improve the credit score, not simply temporarily cover up your existing score while the dispute is processed.
If you do not have the luxury of doing that, because you are already jumping into the mortgage process, reach out to your trusted Mortgage Advisor at McGowan Mortgages as we have many ways to help prepare and boost your credit. We look at your mortgage-based credit score and help put a blueprint together to make sure your credit is in the best position for your best home financing. There may be some other things you can do to raise your score that would not create unwanted hassles.
Buy a Home with Personalized Credit Recommendations
Credit scores and credit reports are more complex than many consumers realize, which can lead to mistakes when applying for a home loan.
During your consultation, we can take a look at your score and discuss your situation, helping you to avoid other potential pitfalls that would be easy to walk into.
We can help you purchase a home or refinance in Missouri or 40 other states. To get started, please give us a call at (816) 631-9687.
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