Credit reports and credit scores impact consumer’s ability to get approved for everything from credit cards, student loans, home mortgage, cell phone, satellite TV, and even auto insurance rates. With so much riding on one document, accuracy is critical to consumers. Yet a recent Federal Trade Commission (FTC) report estimates that 25% of consumer reports have errors on at least one of the three credit bureau reports. This could result in a credit rejection or less favorable terms, due to the errors. For a full copy of the FTC report visit: http://goo.gl/AxrJyI.
For years consumer groups have complained about the complicated and slow process for disputing items and the tendency for the reporting agencies to side with the creditor. Basically if the creditor responds to an inquiry, the information provided by the creditor is weighed more than the consumer, and the error is not corrected.
For these reasons the New York Attorney General has been working with the three credit agencies to change the way disputes are processed and create a more usable system for consumers.
Credit Agencies Impacted
The three credit bureaus that must make changes are Equifax, Experian and TransUnion. These three agencies are private companies. They gather consumer data and then sell it to companies. They currently maintain records for over 200 million consumers which impacts how much they pay for credit and their access to credit.
What Changes Are Being Made
The major changes include adjustments to the dispute process, how medical bills are handled on the report, communications, and what can be reported.
Dispute Process will move from being automated to hiring specially trained employees. Currently the bureaus nearly always side with the creditor. After these changes are implemented a person will review automated rejections. Having a live person review the dispute and the information sent in will produce a fairer process. Automatic rejections of disputed items is no longer acceptable.
Medical Reporting. The credit bureaus must wait 6 months before reporting medical delinquencies. This will give consumers time to address insurance claim issues and reduce the number of medical delinquencies due to slow paying insurance companies. Medical debt also must also be removed from the credit report once the delinquency has been paid by the insurance company.
The communications process will be changed with more effort made to inform consumers about access to free reports through the government website www.annualcreditreport.com. Consumers can gain access to their report once every 12 months from each agency. They can also retain a free copy of the report when any corrections are made. Links will be provided on the credit bureau site, linking them to the free government site.
Lastly, the changes prevent reporting of items that are not contractual. This includes things like fines and speeding tickets.
Most of the changes are to be implemented over the next 6 to 18 months will full implementation within three years.
This is a huge win for consumers as more companies are using credit reports to make approval decisions. For consumers to benefit, they must be actively engaged in the credit process. Review individual reports once a year and follow the process for making corrections.
For the full story, published in the New York Times, visit: http://goo.gl/DV7S1P