July 18th, 2016 5:05 AM by Jackie A. Graves, President
credit reporting agencies have
a big change in the works that could bolster a lot of people’s credit scores.
of its National Consumer Assistance Plan (the result of a settlement brokered
with 31 state attorneys general back in 2015), Equifax,
Experian, and TransUnion are planning to significantly reduce the amount
of tax-lien and civil-judgment information found in consumer credit files.
have yet to be finalized, but “there will be less of that type of data in
credit reports moving forward,” Stuart K. Pratt, president and CEO of the
Consumer Data Industry Association, a trade association that represents the
credit bureaus, confirmed to Credit.com. Testing is currently underway and a
final plan regarding the information is expected to be implemented in July
study from major credit scoring model VantageScore recently found that the move
could help a number of people improve their credit. The study assumed the
most extreme form these changes could take—eliminating all civil judgments and tax-lien
data from credit reports—and examined the impact it would have on the
VantageScore 3.0 scores for 4 million U.S. consumers.
these parameters, Vantage found 11% of the sample population had tax
liens or civil
judgments removed. Approximately 8% of the sample received an average score
increase of 11 points when all tax liens and civil judgments were removed.
That may seem like a small amount of consumers. But “the sample
is intended to be representative of the U.S. population,” Sarah
Davies, VantageScore’s senior vice president of analytics, product
management and research, explained. “The idea that 11% of consumers have some
kind of public record [on their credit report], that’s quite a lot of
mention, in certain instances, score increases could be more substantial.
VantageScore found, for instance, that 33.6% of consumers with scores between
581 and 600 saw their scores increase to between 601 and 620 when the lien and
judgment data was removed. And 33.1% of consumers with a score between 601
and 620 saw their score bump up into the 620-to-641 range.
changes are noteworthy, given that, in both scenarios, these consumers could
find themselves newly able to secure a mortgage. Federal Housing
Administration-backed and U.S. Department of Veterans Affairs-backed loans
generally require a minimum credit score of 580. And most mortgage experts
say conventional loans (one not backed by a government agency) generally
require a minimum score of 620.
explained that the average score increase is on the lower side
because many consumers with liens or judgments on their credit reports
have other negative information weighing them down. But “for some people, [the
change in score is] going to be meaningful,” she said.
reduction of tax lien and judgment data isn’t the only change in the works as a
result of the 2015 settlement. As part of its National Consumer Assistance Plan,
the credit bureaus are also working to overhaul their dispute process by, among
other things, employing specially trained personnel to review disputes and
supporting documentation; allowing consumers who discover an error after
obtaining their credit reports through AnnualCreditReport.com to get a second
report free of charge; and providing additional information with the
dispute results, including a description of what a consumer can do if they’e
not satisfied with the outcome.
also plan to introduce a 180-day waiting period between the time a medical bill
account is created and the time it can be recorded on a credit report as due
for collection, as well as forming a multi-company working group to
regularly review and help ensure consistency in reported data.
tax lien and judgment reduction—related to the bureaus’ promise
to eliminate the reporting of debts that did not arise from a contract or
agreement by the consumer to pay, like tickets or fines—is significant in that
it represents the full removal of certain information that has long appeared on
bureaus were given 3 years to implement the new policies outlined in the
agreement. And major changes made by big credit scoring models—including the
exclusion of paid medical debt in their calculations—only apply to the latest
versions of their scores, which have yet to be adopted by all lenders.
interim, you can generally fix your
credit by identifying
your credit score killers and creating a game plan to address them. (You can
track your progress by viewing
two of your credit scores for free each month on Credit.com.)
also be able to improve
your credit scores by disputing
credit report errors, paying high credit card balances down and
limiting new credit inquiries while your numbers improve. And you can
build good credit in the long term by making all your loan payments on time,
keeping your debt levels low and adding a mix of new credit accounts only as
your scores—and bank account—can afford it.
By Jeanine Skowronski - To view the original article click here