Credit report reforms

One of the main reasons you’re likely to be declined for a mortgage is your credit report. More specifically, derogatory information contained therein. Unfortunately, many of us are still not proactive when it comes to our credit report. And for many, erroneous information that is foisted upon them without their knowledge affect their daily lives.

Flawed data has been a long standing issue in the credit industry. A 2012 study conducted by the Federal Trade Commission (ftc.gov) found that “one in five consumers” disputed and corrected an error that was reported to a credit reporting agency (CRA). A follow-up study conducted in 2015 found that “Most consumers [almost 70 percent] who previously reported an unresolved error on one of their three major credit reports believe that at least one piece of disputed information on their report is still inaccurate.” The follow-up study recommended that CRA’s “review and improve” the dispute process, as well as increase consumer education efforts. From the FTC report:

The follow-up study announced today focuses on 121 consumers who had at least one unresolved dispute from the 2012 study and participated in a follow-up survey. It finds that 37 of the consumers (31 percent) stated that they now accepted the original disputed information on their reports as correct. However, 84 of these consumers (nearly 70 percent) continue to believe that at least some of the disputed information is inaccurate. Of those 84 consumers, 38 of them (45 percent) said they plan to continue their dispute, and 42 (50 percent) plan to abandon their dispute, while four consumers are undecided.
The final study also examined whether consumers from the 2012 study who had their credit reports modified after disputing information on their credit reports had any of the negative information that had been removed subsequently reappear on their reports. The study found two instances of this, representing about 1 percent of these consumers.

On March 9, 2015, New York Attorney General Eric T. Schneiderman announced an agreement that was worked out with the three credit repositories (Experian, Equifax, And Transunion). The agencies agreed to seek improvements to the credit report dispute resolution process, as well as increasing protections for consumers from false claims and reporting paid debt (such as medical bills).

As A.G. Scheiderman’s statement was released, the Consumer Data Industry Association (the trade association for the consumer data industry) announced the creation of the National Consumer Assistance Plan. The roll-out of The Plan is to be over three years, and includes a website (nationalconsumerassistanceplan.com) where consumers and the CRAs are to interface about credit reporting news and information. Stuart Pratt, President and CEO of the Consumer Data Industry Association, stated in a press release:

“…The nationwide consumer credit reporting companies are making important changes to their procedures that will improve their ability to collect accurate information, and we want to make sure consumers know about the new options available to them…”

Additionally, the press release included highlights of the National Consumer Assistance Plan:

Consumers visiting www.annualcreditreport.com, the website that allows consumers to obtain a free credit report once a year will see expanded educational material.
Consumers who obtain their free annual credit report and dispute information resulting in modification of the disputed item will be able to obtain another free annual report without waiting a year.
Consumers who dispute items on their credit reports will receive additional information from the credit reporting agencies along with the results of their dispute, including a description of what they can do if they are not satisfied with the outcome of their dispute.
The credit reporting agencies (CRAs) are focusing on an enhanced dispute resolution process for victims of identity theft and fraud, as well as those who may have credit information belonging to another consumer on their file, commonly called a “mixed file.”
Medical debts won’t be reported until after a 180-day “waiting period” to allow insurance payments to be applied. The CRAs will also remove from credit reports previously reported medical collections that have been or are being paid by insurance.
Consistent standards will be reinforced by the credit bureaus to lenders and others that submit data for inclusion in a credit report (data furnishers).
Data furnishers will be prohibited from reporting authorized users without a date of birth and the CRAs will reject data that does not comply with this requirement.
The CRAs will eliminate the reporting of debts that did not arise from a contract or agreement by the consumer to pay, such as traffic tickets or fines.
A multi-company working group of the nationwide consumer credit reporting companies has been formed to regularly review and help ensure consistency and uniformity in the data submitted by data furnishers for inclusion in a consumer’s credit report.

An improved credit reporting industry was to take another leap forward with the introduction of H.R. 5282 – Comprehensive Consumer Credit Reporting Reform Act of 2016 (congress.gov). Introduced in Congress May 19, 2016, the bill is a comprehensive restructuring of the credit reporting process. Among the many details, the bill also: calls for a new dispute process; “meaningful” disclosures about resulting investigations; limits credit reports for employment purposes; requires removal of items that were a result of identity theft, fraud and other crimes; and transfers authority from the FTC to the CFPB on “procedures for reporting identity theft, fraud, and other related crime.” The bill was referred to committee, where it appears to have stalled.

Your credit report has become akin to your “financial soul.” Some of its uses include assisting entities in deciding whether to employ you, lend to you, or extend you credit. It has even become vogue for individuals to check someone’s credit report before going out on a date!

Financial experts and government agencies recommend you become proactive and check your credit report annually, and dispute inaccurate information. Annualcreditreport.com is the only “authorized” website where you can receive a free credit report annually from the three repositories. The site also contains information on protecting your identity, and links to the FTC and CFPB for topics such as how to maintain good credit, and credit repair.

By Dan Krell
Copyright © 2016

Original published at https://dankrell.com/blog/2016/12/23/credit-report-reforms/

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

March 11, 2015October 15, 2019

Credit reporting changes may help home buyers

It’s no secret that your credit report can affect your ability to buy a home. Most mortgage lenders impose minimum credit score requirements to qualify; and tiered interest rates can cost you hundreds of dollars if your credit score is too low.

Your credit score is used as a predictor of your ability to manage debt. The score is the result of an analysis of information that is reported about you to the three credit reporting agencies; and is produced by each agency’s proprietary algorithm. Typical information that can be found in your credit report includes revolving and installment credit accounts, such as credit cards, home equity lines of credit, mortgages, and auto loans. Reported late payments, collections, and judgments can adversely affect your credit score.

Financial experts recommend you review your credit report annually to ensure accuracy, and dispute incorrect information. Annualcreditreport.com is the only authorized website where you can obtain a free annual credit report.

Correcting credit report errors can be tedious; and unfortunately, the outcome may not please you. However, this could change as a result of a recent settlement between New York Attorney General Eric Schneiderman and the three credit reporting agencies. A March 9^thpress release (ag.ny.gov) announced a settlement with the three credit reporting agencies to “improve credit report accuracy; increase the fairness and efficacy of the procedures for resolving consumer disputes of credit report errors; and protect consumers from unfair harm to their credit histories due to medical debt.” The statement quoted a 2012 FTC study that suggested that millions of consumers’ credit reports contain errors. The study indicated that 26% of the participants reported at least one error; and about 13% of the participants reported a positive change to their credit score after disputing errors.

The Consumer Data Industry Association (which represents the consumer data industry, including the three credit reporting agencies) also announced on March 9^th (cdiaonline.org) the creation of the National Consumer Assistance Plan. Stuart Pratt, President and CEO of the Consumer Data Industry Association, stated; “The National Consumer Assistance Plan we are announcing today will enhance our ability to offer accurate reports and make the process of dealing with credit information easier and more transparent for consumers…”

The implementation of the National Consumer Assistance Plan (NCAP) is expected in upcoming months, and is focused on improving how consumers interact with the credit reporting agencies, as well as data accuracy and quality. The NCAP is to build upon recent improvements to consumers’ experience with the credit reporting agencies, which includes a 2013 digital application to facilitate credit report disputes. To ensure consistent and uniform data submission to credit reporting agencies, a multi-company working group is to be formed.

To improve the consumer experience, the NCAP is to: provide expanded credit report education; provide dispute results and suggestions on what to do if not satisfied with dispute outcome; and enhance dispute resolution for proven victims of identity theft and fraud.

To improve data accuracy and quality, the NCAP is to: implement a “waiting period” of 180 days for medical debt; remove previously reported medical collections that have been paid, or being paid by insurance; reinforce consistent standards for data submission; reject data that does not include a date of birth; and eliminate reporting debt which did not arise from a contract or agreement to pay (e.g., tickets or fines).

By Dan Krell
© 2015

April 24, 2013November 23, 2021

Your credit report reveals more than you might know

by Dan Krell © 2013
Google+
DanKrell.com

Why is your credit report important?

Information contained therein could determine whether or not you qualify for a mortgage, and possibly the interest rate you are offered. Typically, lenders use credit reports to determine how you generally manage your debts and financial obligations. Besides being used by mortgage lenders; some banks may review your credit report when you apply for a checking account, and even some insurance companies may use your credit report for underwriting purposes.

Your credit report may say more about you than you might know. The report is considered to be a “snapshot” of your financial management ability. The major credit bureaus, Equifax (equifax.com), Experian (experian.com), and Trans Union (transunion.com), act as information repositories for collected information, and make it available to those who need it. The credit bureaus are informed of your activities by your creditors as well as collecting information from public records; the collected information may include details about your identity, existing credit, public records, and recent inquiries.

Identity information may list your name and aliases, address, Social Security number, date of birth, and possibly employment information. Existing credit information lists accounts that are granted to you, and may include: credit cards, mortgages, student loans, and car loan accounts, payment history, and current balance. Public records may reveal liens, judgments, bankruptcies, and open collections.

Anyone with a legitimate need for your credit report can obtain it. Besides banks, lenders, and those who extend credit, others who may be able to view your credit report include (but not limited to) employers, landlords, and child support enforcement. These inquires are listed in the report.

Your credit score is also included in your credit report. Because each of the three credit bureaus use their own algorithms to determine your score based on the bureaus’ information, the three scores may vary somewhat. Many credit decisions are initially determined on credit scores, so it’s important to ensure that the reports are accurate so as to reflect in your credit scores.

Factors that may negatively impact your credit scores include (but not limited to): late payments, accounts referred to collection, and/or reported bankruptcy; having high account balances relative to credit limits; applying for many accounts in a short period of time; and having an excessive number of credit accounts.

With such importance placed on credit reports, it’s important to ensure your reports contain accurate information about you and your credit history. Unfortunately, inaccurate data may find its way into your report through poor reporting, misidentification, and even non-reporting of (positive) information. Additionally, identity theft has been a law enforcement issue for years; and is increasingly considered a major public threat.

You can dispute erroneous data with the reporting company, and/or the credit bureau. If you dispute to the credit bureau, the bureau will undergo an investigation. To assist the investigation, the bureau may require your identifying information, an explanation why the reported information is incorrect, and supporting documentation (such as receipts, police reports, and/or fraud affidavits).

Your credit report is considered to be a “snapshot” of your life and your ability to manage credit. Financial experts recommend that you request your report from each bureau annually to ensure the information is accurate. For more information on credit reports and scores, refer to the Federal Reserve (federalreserve.gov/creditreports), the FTC (ftc.gov), and the Consumer Financial Protection Bureau (consumerfinance.gov).

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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published the week of April 22, 2013. Using this article without permission is a violation of copyright laws. Copyright © 2013 Dan Krell.

by Dan Krell © 2013 Google+ DanKrell.com

Why is your credit report important?

by Dan Krell © 2013
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DanKrell.com