New policy governing credit reporting criteria.

Credit Scores

Credit score can make or break a consumer.

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Starting July 1, 2017, the three nationwide consumer reporting agencies, Equifax, Experian and TransUnion, are starting a new policy that will raise about 12 million consumers’ credit scores as much as 10 points.  This could mean the difference in qualifying for a better interest rate when financing a vehicle or other cost savings benefits.

The companies are instituting this new policy following a settlement with lawmakers in more than 30 states. Attorneys general alleged liens and civil judgments were often attached to the wrong people, unfairly hurting their ability to access credit for a home, car or gym membership.

After July 1st if a lien or judgment does not match three of the four criteria of name, address, social security number or birthdate, it will no longer appear on a credit report.  Many courts have specific requirements before a creditor can record a judgment (many requirements are ignored more than honored).  This new policy may bring a focus on the court requirements as related to recorded liens/judgments.

See also: Here’s one thing consumers still don’t understand about their credit scores

Increases in a consumer’s credit score can move them into a more desirable credit category which could mean qualifying for more cards and other forms of credit with lower interest rates.

  • Tax liens and civil judgments will remain on credit reports as long as the citation includes the person’s name, address and either the date of birth or the Social Security number. It is anticipated that 40%-50% of tax liens will remain on credit reports.
  • Because civil judgments do not generally adhere to these enhanced standards, they will be removed from consumer reports. It is estimated that only about 4% of civil judgments might remain on reports.
  • Medical debt that is less than six months old will not be reported beginning Sept. 1.

The Consumer Financial Protection Bureau tracks consumers’ complaints, and one of the most frequent is about incorrect information on credit reports.

The bottom line – don’t take on credit unless you can pay the debt.  As a bankruptcy attorney I see the optimistic use of credit the start of a slow downhill slide into financial distress.  “Learn to use credit, rather than credit using you”.  Diane Drain

About the Author:

Diane L. DrainDiane L. Drain is a well known and respected Arizona bankruptcy attorney. She is an expert in both consumer bankruptcy and Arizona foreclosure. Since 1985 she has been a dedicated advocate for her clients and spokesperson for Arizona citizens. Diane is a retired professor of law teaching bankruptcy for more than 20 years. As a teacher she believes in offering everyone, not just her clients, advice about the Arizona bankruptcy laws. She is also a mentor to hundreds of Arizona attorneys.

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*From Diane: This article/blog is available for educational purposes only and does not provide specific legal advice. By using this information, you agree there is no attorney client relationship between you and me, and that this information should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state.*

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