Your credit score could be going up sooner than you think.
Beginning July 2017 the three major credit bureaus Equifax, TransUnion, and Experian will no longer consider debts that aren’t the result of a contract or agreement to pay. That means debts like traffic fines, and unpaid parking tickets will be removed from reports.
Mandi Woodruff with financial website Magnifymoney.com says it’s a big deal.
“There's been a huge issue with incorrect and incomplete information appearing on peoples credit reports,” she says.
Another change is that minimum identifying consumer information be available before a debt can be reported. That means name, address, and social security number or date of birth be with the debt, otherwise it will be scrubbed. The new standard is expected to heavily impact liens and civil judgments and could make huge changes in credit scores almost immediately.
“As many as 12 million (people) are going to see their credit reports improve as a result of this change,” she says.
Woodruff says most people will see a smaller increase of up to 20 points. But several hundred thousand could see an even bigger jump of up to 40 points.
“Even a credit score boost of 20 points is a big deal when you're talking about things like a mortgage.
When you're spending a lot of money a huge purchase and you're paying that loan back for 15 or 30 years,” she says.
The changes are a result of a 2015 settlement between the credit bureaus and New York’s Attorney General.
Some have already been rolled out. Like the mandate that medical debt be removed from your report once it is paid off and a 180 day grace period before it can be reported in the first place.
Woodruff says it’s a real win for consumers.
“It’s only right that these credit bureaus should be held accountable for that information and that (what they) collect is accurate and complete.”
There are additional protections included in the plan having to do with improved dispute processes and additional help for victims of identity theft. Read about them here.
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