Credit scores get a boost
March 23, 2017
Hoping to buy a home this summer? Your FICO score could increase just in time thanks to a change in the way credit bureaus collect and report certain debt information.
Is someone else’s debt on your credit report?
On July 1, Equifax, Experian, and TransUnion plan to stop collecting and reporting significant amounts of information on civil judgments and tax liens — both of which bring down credit scores. If you actually have, or have had, this type of debt, a hit to your score would be understandable. But in too many cases, such debts have been ending up on the wrong person’s credit report.
As we noted recently, credit reports are often wrong: one in five consumers has an error of some kind on at least one of their reports. Apparently, lien and civil judgment info have been a source of mistakes: the July 1 change is part of a settlement with 31 state attorneys general over alleged inaccuracies, and it applies to both existing and new records.
Tax liens are levied against properties when the owner gets behind on tax payments. Civil judgments, which are court-ordered, are owed by the losing party in legal disputes that result in monetary damages. Credit bureaus will now be required make a better effort to ensure that these publicly recorded debts do in fact belong to the person they’re linking them to before they go into a credit report.
Credit scores will go up for 12 million people
How much of a credit boost are we talking about? As reported by the Los Angeles Times, FICO estimates that of the roughly 12 million people whose scores will rise, about 700,000 will get 40 or more points. The rest will see less than 20. However, even a modest increase can make a difference when you’re trying to qualify for a mortgage and get the best possible terms.
Lenders might not be totally happy with these new standards. After all, they don’t want accurate, need-to-know information left off homebuyers’ credit reports. But consumer advocates are glad to see some action on problems with accuracy and other issues. Earlier credit reporting changes under the settlement included dropping information about fines and tickets and giving people more time to address medical debt.
For more details, read the Los Angeles Times article.
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Filed Under: For Homebuyers