How a Credit Bureau Dispute Can Affect Your Home Loan Application

Dealing with a credit bureau dispute is not an enjoyable experience. This becomes even more apparent when you are in the middle of trying to get approved for a home loan. During a home loan application, you want everything to go smoothly. Here are a few ways a credit bureau dispute can affect you.

Lowers Your Credit Score

Your credit score can be negatively affected. For example, you may have a maxed out credit card on your report that is not yours. Regardless of how it got there, it will lower your credit score if it has been setting there for a while.

The importance of having a high credit score during a home loan application is paramount. It can affect the interest rate, which will cost you thousands of extra dollars over the life of the loan. In addition to charging you higher interest, they might decline your application all together. It is essential to get these issues taken care of before you start the application process.

Debt Ratio

Lenders love to work with debt ratios in deciding who they should lend money to. In addition to credit scores, these ratios are some of the most important factors in lending. They will look at all of your current debts, as well as your income. This debt-to-income ratio is critical in their decision. If you have something on your account that should not be there, it will throw off your debt-to-income ratio. Anytime you add debt to your credit profile, your debt-to-income ratio will look worse than it actually is. Therefore, if you do not get the dispute resolved quickly, your chances of getting the loan you want will decrease. 

Freeze Credit

Another problem that you might run into is a freeze on any new credit that is issued to you. If you suspect that someone has stolen your identity and you are disputing charges on your credit file, the credit bureaus will most likely freeze your accounts and make it impossible for anyone to get credit in your name during this period. If you are attempting to get a home loan at the same time, your lender will discover that your credit has been frozen. This will not encourage them to lend you money and could result in long delays on your application.