Disputing an outstanding bill? You may impact your ability to refi!

[Tod R.]

I posted this WSJ article in the bulletins but thought I would share in the forum section as well.

http://online.wsj.com/article/SB10001424052748703471904576003832552956602.html?mod=igoogle_wsj_gadgv1&

I just refinanced an investment property that basically took 6 months and three mortgage brokers to get it done. Now I am bumping the upper limits on my DTI but one of the biggest issues that kept coming up was two disputes that were showing up on my credit report. One was an $1,100 medical bill that was double billed. We paid what we owed but the second bill was turned over to a collection agency. We had to call the doctor himself and demand they have this removed. I believe it was called a credit release letter.

The other was a finance charge on a 6 month no interest purchase we made a few years ago. My wife being the top financial planner she is, waited until the last few days of that 6 month period before making the payment. Well the check took two weeks to clear and in the meantime, they charged us about $150 of finance charges. Well, she was going to take a stand and demand they reverse the charge. That didn't work out so well and was turned over to a collection agency. She refused to pay, after all right is right. Well my mortgage broker called and said the lender would not close because these outstanding collections caused our credit score to fall into the mid 600's. He said if I could get the credit release letter on the medical bill, which I was able to do, then he could "work round the smaller charge". I was prepared to pay the $150 if necessary at closing to get the refi done but the broker was able to get us closed without doing so.

[Bryan Hancock]

Welcome to the wonderful world of being guilty until proven innocent! Banks are evil...plain and simple. The whole credit scoring process is a mockery and serves the banks and not the consumers. If you ever try to build some business credit it will get even harder!

There are laws for this kind of stuff. My father-in-law is an attorney and he writes nasty letters for us any time something like this comes up citing credit statutes. We are fortunate to not have to pay for it. I generally draft most of the letter, he cleans it up and adds some legal verbiage, and we ship it off certified mail read receipt requested. That has worked fairly well for us, but it generally takes a ton of time....time that you don't have when you are trying to close.

These "zero interest" offers are almost always scams from what I have found. They play games like what you have experienced so I steer way clear of them now to keep my credit pristine. My wife had our first child in January of this year and we JUST resolved a bill that the hospital tried to bill us for twice. We had to call the corporate office to get it resolved.

The bottom line is that this stuff is not easy and you have to guard against it at all times to retain your ability to borrow. Any time you get a credit extension or pay a bill from a credit card company, medical company, or any of the various other incompetent bureaucrats (insurance companies, IRS, etc.) make sure you get a well-documented receipt for payment. Monitor your credit monthly with a service like Truecredit.com or myfico.com or some such.