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The 411 On Dispute Notations


The 411 On Dispute Notations

What Are Dispute Notations? When you dispute an account on your credit report, the credit reporting agencies (i.e. Equifax, Trans Union, and Experian) are  obligated under the Fair Credit Reporting Act [FCRA 15 U.S.C. § 1681s-2(b)] to report the account as “in dispute” on your credit report. Data furnishers (i.e. creditors and collection agencies) are also required to report the account as “in dispute” under the Fair Debt Collection Practices Act (FDCPA 15 USC § 1692e). The credit bureaus list an account as “in dispute” on a credit report by assigning the “XB” code on the disputed account. Whenever the “XB” code is placed on a consumer’s credit report a note or narrative appears with the account information which reads something along the lines of “Consumer disputes, investigation in process.” Translation: the credit bureaus received the dispute and they are in the process of investigating the consumer’s claim.

Why Do Dispute Notations On a Credit Report Matter?

Dispute notations on your credit report can make it difficult for you to be approved for a mortgage. The reason that lenders and loan underwriters often have a problem with the “XB” code, aka the dispute notation, is because the FICO scoring model voluntarily treats accounts with the “XB” code differently than normal accounts. FICO chooses not to allow an account which is in the middle of an active, initial dispute to lower a consumer’s credit score. The account will still appear on the credit report; however, FICO will ignore the following: payment history and balance. For example, if a consumer is in the middle of an active dispute on an auto loan with late payments, then FICO will not consider those late payments when calculating the credit score. The result? The potential for a falsely elevated score—temporarily. This potential for the falsely elevated score is why underwriters typically require the removal of any dispute notations from a credit report prior to a mortgage loan approval, in order to ensure that they are seeing a consumer’s true FICO score.

What Happens After the Dispute?

When the 30 days of an active dispute cycle has been completed then the credit bureaus will typically take one of the following actions:

(1) Delete the disputed account if it was not properly verified by the data furnisher (aka the original lender or collection agency) or

(2) Remove the “XB” code from the tradeline and replace it with a persistent narrative code like -

(a) “XC” - completed FCRA dispute, consumer disagrees or

(b) “XH” - account previously in dispute, now resolved

The “XC” and “XH” codes signify that the consumer disagrees with the way the account is being reported; however, FICO will NO LONGER treat the account differently by ignoring payment history and balance on the account. The result? The score NO LONGER has the potential to be falsely elevated.

 Be Aware!

Unfortunately, loan underwriters (especially on manually underwritten files) will often simply read the words "in dispute" and assume the account is undergoing an active dispute. The result is that an underwriter may turn down a loan due to the "in dispute" notation because he/she assumes that the FICO score is falsely elevated with the "XB" code.  The good news is that you have the right under the Fair Credit Reporting Act (FCRA) to ask the credit bureaus and data furnishers to remove the "in dispute" notation from your file. Typically, you would only learn of a problem with outstanding and/or invalid dispute notations on your credit report if (a) you apply for a mortgage and are turned down due to this issue or (b) you are working with a professional credit restoration service who catches the error for you ahead of time.

NOTE: Current members of the HOPE Program can request for their case manager to send dispute removal request letters on their behalf at no extra cost.

Removal of Dispute Notations

I mentioned that it is your right to request the removal of any dispute notation from your credit report on any account which is not actively in dispute. The question you are probably asking right now is "how?" What steps can a consumer take to get this error corrected? Here are 3 options to consider:

1. Call the Credit Bureaus Often you can receive the removal of the "XB" code or any other dispute code by simply calling the credit bureaus, letting the consumer service representative know that you no longer dispute the account, and asking them to remove the "XB" code and any dispute notations from your report.

2. Write the Credit Bureaus You can submit a written request to the credit bureaus and the data furnisher directly to request the removal of a dispute notation. Remember, online disputes are typically not your best option and the credit bureaus and data furnishers have 30 days, by law, to process your request.

3. Consider Settling the Account It can be frustrating to settle an account which you do not believe is being reported accurately. However, especially in the case of low balance accounts, you may wish to consider settlement. A dispute notation usually does not matter to the mortgage underwriter if the account has a $0 balance. (Be sure to verify this fact with your loan officer or underwriter first.)

HOPE has developed a detailed, step by step, dispute removal handbook to help you. The HOPE Dispute Removal Handbook (Loan Officer Edition and Client Edition) contains direct phone numbers to all 3 credit bureaus and more detailed instructions to help make this process a little easier for you. Please feel free to contact us if you would like to request a free copy.

Michelle Black, Credit Expert

Michelle Black,
Credit Expert

About the Author: Michelle Black is a 12+ year credit expert with HOPE, the credit blogger at, a recognized credit expert on talk shows and podcasts nationwide, a contributor to the Wealth Section of Fort Mill Magazine, and  a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, budgeting, and recovering from identity theft.

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