Important Changes in Credit Bureau Reporting

Last month the CFPB (Consumer Financial Protection Bureau) issued a report addressing concerns on reporting practices from the three major credit bureaus. The problems centered around current standards to ensure accurate information found in public records. The CFPB looks for the credit bureaus to find ways to ensure increased accuracy when matching information found in public records with the correct consumer and the lack of updating records frequently.

In response to this report, and in cooperation with a legal settlement between the credit bureaus and 31 state attorney generals, Experian, Equifax, and TransUnion agreed to remove tax lien and judgment data from credit reports for most Americans. Tax lien and judgment records which lack vital information, including the individual’s name, address and either date of birth of social security number will no longer appear on consumer credit reports starting in July 2017. Further requirements include verifying and updating public record data at least every 90 days.

Since most public records do not contain three of the four required pieces of information, the decision will impact nearly 12 million consumers, who can expect to see an increase in credit score and improved credit reports, later this year. FICO analysts expect the majority of impacted consumers to see less than a 20-point increase. While an estimated 700,000, will enjoy a score improvement of more than 40 points.

The goal of the CFPB and the credit bureau companies is to provide an accurate assessment of consumer risk to those evaluating applications. The use of credit files today goes well beyond loans and can prevent consumers with poor credit from obtaining a job, turning on utilities without a deposit, or being approved for an apartment. Currently, an estimated 20% of credit files contain inaccurate information which negatively impacts the consumer’s credit score, prompting the upcoming changes to consumer credit files.