Credit Reports Are About to See a Major Overhaul

Over the next 6-18 months credit reports will start to see some changes that could benefit many consumers. This comes from several years of investigations of the three major credit bureaus’ practices by New York Attorney General Eric Schneiderman. After a year of talks between the credit bureaus and the Attorney General – changes are coming soon!

There are two major changes that will be happening with this overhaul. One is how credit disputes are handled by the bureaus. The second is how medical debt is reported on a consumer’s report.

Let’s start with credit disputes. Right now when a consumer disputes inaccuracies on their credit report, the majority of those disputes are outsourced to overseas employees. They turn the dispute into a 3 digit code. This code is sent to the creditor. If the creditor comes back that the information is correct then the dispute is done. More often than not though, that resolution is not what the consumer wants. There is no real investigation of the dispute. The bureaus are now hiring hundreds of specially trained employees who will do nothing but thoroughly review each individual dispute. This will finally give consumer disputes the time and attention they deserve.

The second change is how medical debt is reported. According to Attorney General Schneiderman “Over half of all collection items on credit reports are medical debts and those debts may not accurately reflect a consumer’s credit worthiness.” The majority of medical collections are due to an insurance company dispute or delay. With hopes of increasing the accuracy of medical debts, now they cannot be reported by a collection agency for 180 days. This should give time for insurance payments to be applied or for the consumer to pay the debt themselves. The other bonus is that collection agencies will now be required to remove any reported medical debts that have been paid or are being paid by an insurance company.

There are a couple of other changes that are certainly important but not quite as significant. Debts like parking tickets and library fines are not allowed to be reported. However if those debts are turned over to a collection agency (which most are) the collection agency can still report the debt.

Also, as of now a consumer can only get one free credit report per year from Going forward, consumers who have a change on their credit report based on a dispute will now also be able to get a second free credit report without having to wait a year.

How can Advantage Credit help? As a third party credit reporting agency we can use this information to help our clients advise their borrowers on these changes. For example, our rescore department can help by advising on how consumers can approach a collection agency if they have medical collections that are being paid or have been paid by an insurance company. This could result in doing a rescore which could then remove that debt quickly. Our consumer dispute department can assist by filing disputes for your borrower regarding inaccuracies on their credit reports.

The best thing about these changes is that they are not specific to one scoring model. They are across the board. So unlike the changes that were implanted in FICO 09, which were great but not at all helpful because it is not accepted by Fannie Mae and Freddie Mac, these new changes will affect all scoring models including those accepted by Fannie and Freddie.

These changes are long overdue and hopefully, with more scrutiny will open the door to ongoing bigger and better changes with the bureaus and how credit is handled.