Everyone makes mistakes, including the credit bureaus, which means that you'll occasionally find an error on your credit report that could be bringing down your credit score. Disputing an item can get the errors fixed and raise your credit score permanently, but it can also serve as a stopgap to having the negative information hurt your score.
To dispute information on your credit report, the Federal Trade Commission advises contacting both the creditor who provided the information and the credit bureau who reports it on your credit report. When the credit bureau receives your dispute, it will temporarily mark the account as "XB" or in dispute and under investigation. While the investigation is ongoing, the credit bureau won't include that information in calculating your credit score, which can give you a temporary boost in your credit score.
If you're thinking you can just dispute everything to get a temporary boost before you apply for a new loan, think again. Lenders are wary of people simply disputing all the negative information on their credit report to get an artificially high credit score for their loan applications. According to Mint.com, many lenders will require that none of the items on your credit report be in dispute before they make you a new loan, which means your score will come back down if the credit bureau determines the negative information is accurate.
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If, on the other hand, you prevail in your dispute, the credit bureau must stop reporting that negative information on your credit report. With at least one less piece of negative information on your report, your score will go up. How much it goes up depends on the negative information. If you had one late payment from a few years ago removed, it probably won't go up much. But, if your credit report accidentally contained someone else's loan that was consistently late or even defaulted on, you could see a substantial increase.
If the credit bureau investigates and finds the negative information is accurate, you can still have it labeled "in dispute" on your credit report. However, since it's already been investigated and found to be accurate, you won't be able to have it excluded from your credit score calculations. Instead, all the "in dispute" label will do is tell creditors you disagree with the information, and then it's up to the creditor to believe you or the creditor who reported it and the credit bureau that found the information to be accurate.
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