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Introducing the New and Improved Credit Report

The benefits might not be what you expect

Credit reports have been notorious for inaccuracies caused by insufficient data collection standards. In the most extreme cases, individuals have been mistaken for terrorists or marked as deceased because of an incorrect connection with someone of a similar name (a problem so pronounced it was featured on John Oliver’s Last Week Tonight). Thankfully, the three nationwide consumer reporting agencies – Equifax, Experian and TransUnion – are collaborating on an initiative to enhance the accuracy of credit reports called the National Consumer Assistance Plan (NCAP).

On July 1, new credit reporting standards went into effect instituting a new minimum for identifying information on public records for credit reporting (it now needs to have a name, address, AND social security number and/or date of birth), plus a minimum frequency of courthouse visits to obtain newly filed and updated public records of at least every 90 days. About 12 million people are expected to see an improvement in their credit scores through the removal of most civil judgments and tax liens, with an average score increase of 10 points thanks to the new regulations.

The cumulative effect on the lives of low- to moderate-income Americans will go a long way towards achieving lasting financial security:

  1.  New Opportunities

Credit scores determine an individual’s eligibility for life-changing opportunities including housing, student loans, and in many states, employment. Stress around credit is far too common with our financial coaching customers: according to data collected through our web-based financial coaching platform, Change Machine, 22% of customers in 2016 came to a financial coach because of an issue with credit, including the 24% who were “credit invisible.” When having a place for a family to live is at stake, no one should face a rejection because of inaccurate or out-of-date information on their credit report.

  1.  Relief from the Dispute Process

The Clinic’s coaches experience the struggle of helping customers navigate the credit reporting dispute process firsthand when they find incorrect information. It is a lengthy, time consuming process to collect the necessary documents and fill out the correct paperwork. For someone working several jobs just to put food on the table, this onerous process can be a challenge to say the least. Then, as an FTC study found, most consumers (nearly 70 percent in their study) who complete the dispute process continue to see inaccurate information on their report. With the improved standards of data reported, there will be less inaccuracies to dispute, easing the burden of removing incorrect or questionable information.

  1. Looking Forward

The next phase of the NCAP takes effect on September 15, setting a 180-day waiting period for medical debt before including it on a credit report. It will also remove medical debt from consumers’ reports once it’s paid by an insurer. We all know how complicated health insurance is – the forthcoming changes to reporting medical debt will ensure disputes with insurers and delays in payment can be resolved without an individual’s credit score taking an unnecessary hit.

The Financial Clinic applauds these changes that place higher standards on the reporting of negative credit items of public records and medical debt. We believe that this will lead to fewer financial security hurdles for our customers and an easier dispute process for coaching around the country.

What challenges do your customers face because of their credit reports? Do the new standards alleviate these challenges or is there still room for improvement? Join the conversation on Change Machine’s SHARE community!

Want to learn more? Join the Clinic on August 22 for a virtual presentation on Pulling and Reviewing Credit Reports.