Credit is tricky. It seems to work against us more than it works in our favor, and in recent years, there’s been a push to improve the system. In this vein, the three major credit bureaus (Equifax, Experian, and TransUnion) recently decided to make a change that will help 12 million consumers in the U.S.
According to the Consumer Data Industry Association, the three bureaus will change their standards for reporting tax lien and civil judgment data. If the data doesn’t include a complete list of the person’s name, address, social security number, or date of birth, it won’t be included, and, according to MarketWatch, most liens and judgments don’t include all of this info. The change will go into effect around July 1st. Paid tax liens stay on a person’s report for seven years.
Bankers argue this a bad move because they’ll have a harder time gauging creditworthiness for loans. The thing is, we don’t just use credit for debt. Credit affects everything from our monthly bills to your ability to get an apartment. Landlords and (some) employers check your credit, and bill providers are legally allowed to charge you a fee if you have bad credit. In other words, credit isn’t just about debt. Bad credit can make your life difficult in many other ways.
As a result of this change, 12 million U.S. consumers will probably see a boost in their score. How high? That depends on a lot of factors, including what their score looks like to begin with. While the move only affects about 6% of the U.S. population with credit scores, it’s a move in the right direction for the industry in general.
Earlier this year, the Consumer Financial Protection Bureau (CFPB) put out a call for public feedback on credit reporting. They want to research the possibility of using other information, like rent and bill payments, to gauge credit. The idea is: if your credit sucks but you have a history of on-time rent payments, that history should be included in your report, too, as it may help boost your score. If you have opinions on this, you have until May 18, 2017 (provided the CFPB as we know it is still around) to submit your feedback. They list a few ways to do this:
- Electronic: Go to http://www.regulations.gov. Follow the instructions for submitting comments.
- Mail: Monica Jackson, Office of the Executive Secretary, Consumer Financial Protection Bureau, 1700 G Street, NW., Washington, DC 20552.
- Hand Delivery/Courier: Monica Jackson, Office of the Executive Secretary, Consumer Financial Protection Bureau, 1275 First Street, NE., Washington, DC 20002.
Beyond changing the way credit is calculated, the best thing consumers can do for their credit is to make sure they know what it looks like. You’re entitled to a free copy of your credit every year from each of the three major bureaus, and you can get your copy at annualcreditreport.com.