Credit bureaus have long been the target of lawmakers, federal regulators and consumers for their error-filled credit reporting. While there have been some improvements, a new plan could not only reduce scrutiny on the bureaus, but also improve their image with consumers.
The start of the new month represents the beginning of new protections for those suffering from the consequences of low credit scores. The changes could help reduce reporting errors that prevent them from securing everything from credit cards to jobs.
The National Consumer Assistance Plan, a joint effort among Equifax, Experian and TransUnion, is the result of a 2015 settlement between the three major credit bureaus and 31 state attorney generals. Key parts of the plan will improve credit reporting accuracy and provide more transparency.
Consumers dealing with tax liens, civil judgments, medical debts, and authorized user accounts will receive greater protections, specifically improvements in accuracy and dispute resolution.
Credit card issuers, lenders and renters are concerned about not getting as accurate of a picture as they once enjoyed. They fear that the new standards could suppress data that artificially raises credit scores, making consumers appear at a lower risk.
Eric J. Ellman, interim CEO of the Consumer Data Industry Association, fears that a vast majority of civil judgment data and half of tax lien records will not meet the new standards. Experian and TransUnion claimed that civil judgments might no longer be part of their consumer credit databases.
While the overall impact on credit scores will be minimal, FICO projects 11 million of the 12 million consumers affected by the policy change will see an increase of less than 20 points. However, approximately 700,000 could have their scores rise 40 or more points.