In recent news, the three major credit bureaus are seeing some changes. Their businesses have long operated with some major flaws. These problems involved how the credit report agencies manage errors and post negative information. The impractical and unjust protocols resulted in a $6 million settlement. This involved 31 states and Equifax, Experian and TransUnion.
Beyond the settlement, many changes must now be made by each of the three bureaus. These changes will have a sizable impact on the way your credit report looks. This also factors into how your credit score is calculated.
This information needs to reach every single American!
The changes you will read are set to release over the next 3 years and 90 days. This will get done in three different phases. It’s predicted that the majority of the changes will take effect within six to 18 months.
Read on and find out why change is coming, what will become different, and whether it will impact you!
What Did the Bureaus Do Wrong?
The Consumer Financial Protection Bureau (CFPB) began overseeing the credit bureaus in 2012. The CFBP started monitoring the bureaus to make sure they reported data with accuracy, among other things. The CFPB took action once consumer complaints started coming in high volume. This lead to a three-year long investigation, tying up many services in 31 different states.
The findings of the investigation made one point clear…
The protocol for identity theft, and other serious issues, is insufficient in it’s current state.
For a long time, the standard practice by the bureaus was to stay isolated from each other. Minimal information would exchange between the bureaus. But, now there is more focus on sharing that information for the greater good.
…and that greater good is just a fair platform for evaluating a consumer’s creditworthiness!
How Will This Help Consumers?
To put it simple, consumers now stand a better chance of having a fair credit report and score. But, these changes will not impact every single borrower. Instead, the changes will matter more for a specific category of credit files.
Here are the types of consumers that might see an impact from these changes:
Anyone with debts in collections through agencies that play hard ball.
If your credit report shows the collector’s info, without anything about the creditor, you are living on a prayer. The collections agencies should give it to you, but sometimes they play hard ball. Now there’s no more guessing involved, as info on the original creditor must get put in the report.
Anyone who is about to experience a setback from medical expenses.
This is a big problem area for consumers, and it’s commonplace for billing errors to happen here. Now, there is a 180 day grace period before medical debts post on credit reports. This gives the consumer enough time to make good on the debt, or to fix any errors that got made in the billing process.
Anyone that saw their score drop because of unpaid fines or tickets.
Consumers have lost over 100 FICO score points just because of unpaid parking and speeding tickets. This is something that serves as a bit of a revolution. Even in Canada, it’s standard for credit scores to calculate with unpaid tickets factoring as a negative. Now you never have to worry about your tickets showing up on your credit report.
The 7 New Rules for Credit Bureaus
Enough horsing around, let’s look at what’s going to change!
1) If a mixed file gets identified by a credit bureau, it must get reported to the two other bureaus.
2) A new and improved system must get made to share information between reporting companies and report bureaus.
3) Companies and government agencies can no longer report your unpaid fines and tickets.
4) You now have a 180 day grace period before medical debts surface on your report.
5) Debt collectors must include contact details of the original creditor when posting on a report.
6) Consumers who win an error dispute now receive more free credit reports.
7) The bureaus must better inform consumers of the sole authorized source for your free credit report – AnnualCreditReport.com
“Will My FICO Score Change?”
You might think these changes will have an impact on your credit score. And, they will. The problem is the adjustments made will just show up over the course of the over three year plan. But, if your credit score is at an artificial low from unpaid fines or tickets, there might be an up side. Your FICO score could see a big increase, which is great if you cannot afford to repay those debts.
It is important to watch for any updates on this settlement. The phase takes 3 years and 90 days, so there will be a few times when the FICO calculation algorithm changes. But, as stated earlier, it’s predicted that the majority of changes will come into effect in six to 18 months.
Now, more than ever, would be a good time to start looking into a credit monitoring service. Find one with monthly credit scores to best keep an eye on how this settlement changes your status as a borrower.
Alabama, Alaska, Arizona, Arkansas, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Maryland, Massachusetts, Michigan, Missouri, Nebraska, Nevada, New Mexico, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, Vermont, and Wisconsin.
*New York was a part of this investigation, but branched off in March of 2015. After settling with the same three credit bureaus, the state influenced a nation-wide change.