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Credit can be quite complicated, often seeming to work against us rather than for us. Over recent years, there’s been a growing effort to reform the system. In this context, the three major credit bureaus (Equifax, Experian, and TransUnion) have recently introduced a change that will benefit 12 million consumers in the U.S.
As per the Consumer Data Industry Association, the three bureaus are updating their standards for reporting tax lien and civil judgment information. If the data lacks a complete set of identifiers, such as the individual’s name, address, social security number, or date of birth, it will not be included. MarketWatch reports that most liens and judgments typically do not contain all of this information. This change will be implemented on July 1st. Paid tax liens will remain on a person’s credit report for seven years.
Some bankers argue that this change is problematic as it will make it more difficult to assess creditworthiness for loans. However, credit is not only used for taking on debt. It plays a significant role in everything from monthly bills to renting an apartment. Landlords and certain employers check credit scores, and bill providers are legally allowed to charge fees to individuals with poor credit. In short, poor credit can create challenges beyond just debt.
As a result of these changes, 12 million U.S. consumers are likely to see their credit scores improve. The extent of the improvement will depend on various factors, including their current credit score. Although this move will impact only about 6% of the U.S. population with credit scores, it represents a positive shift in the industry overall.
Earlier this year, the Consumer Financial Protection Bureau (CFPB) called for public feedback on credit reporting. They aim to explore the possibility of incorporating other data, like rent and bill payments, to assess credit. The idea is that if your credit is poor but you have a strong history of timely rent payments, this should be included in your report, as it may help raise your score. If you have thoughts on this, you have until May 18, 2017 (provided the CFPB as we know it is still operational) to submit your feedback. They’ve outlined a few submission methods:
Electronic: Visit http://www.regulations.gov. Follow the instructions for submitting your comments.
Mail: Monica Jackson, Office of the Executive Secretary, Consumer Financial Protection Bureau, 1700 G Street, NW., Washington, DC 20552.
Hand Delivery/Courier: Monica Jackson, Office of the Executive Secretary, Consumer Financial Protection Bureau, 1275 First Street, NE., Washington, DC 20002.
In addition to altering how credit is calculated, the best thing consumers can do to improve their credit is to know what it looks like. You are entitled to a free copy of your credit report once a year from each of the three major bureaus. You can obtain your report at annualcreditreport.com. Then, check out our guide on how to understand it.
