Can the dispute process affect my credit history?

There are rights of protection by law which means you cannot be penalised nor can your credit worthiness be affected. The decision to proceed to Stage 2 is only taken after conducting a Legal Opinion which will provide you with the obvious confirmation and evidence that you have a valid cause of action, if you file a valid dispute case with your bank/lender. Any breach by a Lender could have serious regulatory consequences for them.