When you start planning for your FHA home loan and reviewing your credit reports, it’s entirely possible that you could find erroneous information in your reports.
Sometimes the credit information for another person with a similar name could wind up accidentally being posted in your report, other times there may be inaccurate data in your credit history about the amount, frequency, or age of your credit account payments.
How should a potential FHA borrower deal with these issues? HUD 4000.1 addresses some aspects of this issue, but not all the credit problems a borrower could experience when reviewing a credit report are covered by HUD and FHA home loan rules.
HUD 4000.1, the FHA loan handbook, instructs the lender on how to proceed if the lender finds inaccuracy in debt information during the application review process:
“When an inaccuracy in the amount or type of debt or obligation is revealed during the application process and the correct information was not considered by the AUS, the Mortgagee must:
- verify the actual monthly payment amount;
- re-submit the Mortgage for evaluation by TOTAL if the cumulative change in the amount of the liabilities that must be included in the Borrower’s debt increases by more than $100 per month; and
- determine that the additional debt was not/will not be used for the Borrower’s Minimum Required Investment (MRI).”
These procedures address a very specific need in the home loan application process, but FHA loan rules don’t cover other situations such as when the borrower is preparing for the loan and finds inaccurate information in the credit report.
In such cases, the lender is not part of the process required to correct the reports; the borrower must deal directly with the credit reporting agencies reporting the inaccurate data.
The consumer is required to contest this data with the credit reporting agencies and the creditors themselves depending on circumstances. This process can be time consuming and borrowers should not expect a fast resolution to the problem.
Don’t delay in contacting a credit reporting agency to dispute such inaccuracies. You may be required to work with the agency to document and verify the accurate data you need in your credit report. If an investigation is required due to problems with hackers, identity theft, etc. you may have to file police reports and other paperwork in addition to any requirements of the credit reporting agency.
The Federal Trade Commission has advice for consumers who need to contest inaccurate credit report information; the official site advises borrowers filing a complaint to submit “copies (NOT originals) of documents that support your position. In addition to providing your complete name and address, your letter should clearly identify each item in your report you dispute, state the facts and explain why you dispute the information, and request that it be removed or corrected.”
It is a very good idea when contesting your credit report to submit a copy of that agency’s credit report with the disputed items clearly highlighted or otherwise marked for attention. Always send your dispute to the credit agency via certified mail and marked “return receipt requested,” to properly track and document your dispute.