Credit reports in America are going through a key overhaul, and it’s certainly one that will greatly help consumers. Considered by most to be the most extensive industry overhaul in this era, the three main credit bureaus (Experian, Equifax, and TransUnion) agreed to be more pre-emptive in credit card disputes reform how the medical debt is normally factored into an individual’s credit score. Well, these credit bureau vicissitudes will take time to implement, but it’s definitely a nice change to go with the overhauled FICO score we saw the previous year.
But why are these changes being made?
After about one year of negotiations between the three main credit bureaus and the State of New York, steered by its attorney general, the two parties agreed to a refurbishment of the system that will be instigated sometime in the next 6 months to 3 years. The changes will be implemented nationwide even though the agreement is between the three major credit agencies and New York.
Even though this change will not affect all consumers, it could benefit millions of people annually. These changes are great news for individuals who want to file a complaint concerning a credit report inaccuracy or those with medical debt.
If an individual now files a credit report dispute with any major credit bureaus, the entire process is automated. The bureau will then communicate to the lender by sending a letter reporting the alleged error. If you get a letter, it simply means that it’s removed from your report. In case the bureaus fail to provide information confirming that everything is correct, then there is no error. Lenders usually have between 30 to 45 days to prove their info is valid.
The main issue with this common way of fixing faults is that the bureau is only checking what the lender has to say and not the consumer. If the lender’s info is erroneous, but there’s still a record of it, chances are significant change will not be made. The new system will need a real human agent to evaluate the dispute and check whether the lender’s info is truthful. The customer will have an easy time verifying documentation to an agent as to why the lender made an error, such as providing proof of payment and even the bank statement of the allegedly unpaid debt.
An additional benefit for consumers is that those filing a dispute with any of the bureaus will be permitted to get a second set of credit reports – instead of just one annually from AnnualCreditReport.com, to ensure errors to have been negated actually are.
About 20% of Americans have unsettled medical debt on their credit report. A modification to the credit reports overhaul will now offer customers having a medical debt sent to collections a grace period of 6 months before it finally appears on their credit report. This is specially designed to give consumers time to settle their medical debt without affecting their credit scores. Consumers will now have extra time to agree with the relevant service providing for their medical bills.
Initially, when the insurer made a late payment to a doctor or even hospital, the debt could immediately get reported to a collection agency and adversely affect your credit scores. The additional 180 days are also intended to provide enough time to help clear up those kinds of problems right before they’re forwarded to collections. If an insurer pays the wrong debt, it now must be withdrawn speedily by the credit bureau. Before, it was on the individual’s credit report for as long as six years. About a Consumer Financial Protection Bureau research, slightly more than half the debt on consumers’ credit reports is medical. The typical amount for anyone with medical debt is just under 600 dollars.
Although these changes will take long before they are fully implemented, this is a win for America and their credit reports.