An erroneous credit report can cause you tremendous headaches in several ways. Not only can you face being rejected for loans, credit cards and mortgages, you also have to correct your credit report — a long and surreal process worthy of a video game script.
Fortunately, the process is set to change thanks to efforts through the New York State Attorney General’s office. They began investigating the issue of erroneous credit reports in 2012. The recent announcement from New York Attorney General Eric Schneiderman represents a settlement of the investigation between his office and the three main credit bureaus (EquiFax, Experian and TransUnion).
While the settlement is with New York, the changes will be implemented nationwide. The credit agencies agreed to implement the changes over the next 39 months, but according to the Consumer Data Industry Association, most changes should be applied over the next 6-18 months.
Among the most significant changes are:
- Consumer Input Elevated – The burden has always been on the consumer to prove a credit reporting mistake, and the input of the consumer has always been weighted far below the lender or creditor.
Currently, much of the credit review process is automated and outsourced. The complaint is categorized into a numerical code that is fed into a computer and sent to the creditor, along with any relevant documentation. If the creditor does not acknowledge a mistake, the process generally comes to a halt. Schneiderman called this practice “a rubber-stamp approach that will no longer take place.”
In essence, the credit bureaus will be obligated to assign someone to settle the dispute without an automatic acceptance of the creditor’s viewpoint.
- Medical Bill Policies – In a 2014 study, the Consumer Financial Protection Bureau (CFPB) found that healthcare bills constituted over half of the unpaid collections listed on credit reports. Medical bills are particularly insidious — because of the convoluted insurance payment process and the swirl of personal issues surrounding a medical event, it is possible to receive a bill just as payment is due. Even worse, the insurance company may be holding off on a disputed payment that puts you into collections without you realizing it.
Two reforms are being implemented in this area. Medical debt will no longer be listed until it becomes 180 days delinquent and medical debts that are subsequently paid by insurers will be removed from your report.
- Easier Monitoring – Everyone is already entitled to one free report during a 12-month period from each of the credit agencies through http://www.annualcreditreport.com. All three credit agencies agreed to include the link to the free report on their websites in a conspicuous location. Also, if a report is corrected consumers can confirm that change by asking for a second free report within the same 12-month period.
- Exclusions – Collection companies will no longer be able to report to the collection agencies items like certain fines and tickets that are not related to any payment contract or agreement.
While there is no fine associated with the New York settlement and the credit bureaus admit no wrongdoing, there will be costs involved, given the extra overhead of more employees to investigate individual credit disputes.
Fixing credit reports is never going to be a pleasant process, but once the settlement terms take hold, the process should be much easier for the average consumer. It is a welcome change that is well appreciated by anyone who has been through the correction process before — because unlike a surreal video game script, you cannot hit the reset button on real life and start over.
If you believe there is a mistake on your credit report, try our credit correction service.