Court settlements from 2015 brought about substantial changes in how the three major credit reporting agencies (Experian, Transunion, and Equifax) (“CRAs”) report on your credit. Depending on your financial situation, these changes could have a positive impact on your credit score.
The first change, which took effect on July 1, 2017, impacts how tax liens and civil judgments are reported. Before the change, the CRAs gathered information on most tax liens and civil judgments. As the information contained in public records are often incomplete (i.e. not having even a partial social security number, or missing middle initials, etc.), this led to situations we refer to as “mixed files” – someone else’s information appeared on your credit file due to the incomplete information. As a result of the settlements, CRAs will require that these public records contain the subject’s name, address, and either their full social security number or date of birth. Nearly all civil judgments and at least half of the nation’s tax lien records do not meet the new standards and will be removed from consumer credit reports. The absence of this information reflected in a person’s credit score will impact about 7% of scoreable credit reports and could mean up to a 20-point increase. A related change is that the CRAs will update their public records information at least once every 90 days.
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A second change, which deals with medical debt, took effect on September 15, 2017. The Consumer Protection Finance Bureau (“CFPB”) has found that medical debt makes up over half of the debt collection items on credit reports, but often times these items reflect debt that is not the responsibility of the patient. Other times the debt is reported too quickly, not taking into account that payment may be held up because of negotiations between medical providers and insurers. With the recent change, medical debt will not be included on a consumer’s credit report until after 180 days has elapsed. This six-month window is important because it allows for time to resolve any issues that may result from insurance negotiations, billing disputes, or other legitimate delays.
CRAs will also remove medical debt from consumers’ credit reports once it is paid by an insurer. Some credit scoring models don’t penalize paid medical debt from any source, so this should assist consumers where the debt is paid, just not by them.
A third change also took effect on September 15, 2017. All debts reported by creditors (called “furnishers” under the Fair Credit Reporting Act) must include the full social security number or full date of birth of the subject consumer. This is intended to assist to avoid mixed file situations.
Hopefully these changes will lead to fewer mistakes and errors on consumers’ credit reports. As always, it is important for you to monitor your credit files from the three CRAs and act immediately if any incorrect information appears.
If you have any questions about your credit reports, or encounter errors or fraud, please feel free contact us.