Experian, TransUnion, and Equifax Announced Major Changes That Could Give You a Better Credit Score

credit scores

Some Americans may see a boost in their credit scores this summer thanks to new policies adopted by credit report agencies Experian, TransUnion, and Equifax.

The big three credit bureaus will eliminate some negative information from appearing on credit reports, according to the Consumer Data Industry Association, a trade association that represents them.

But before you anticipate more credit approvals on the horizon, it’s important to keep in mind that these changes will likely affect only a small portion of the population. Here’s how these credit report updates may impact you this year.

Policy changes address consumer complaints

Experian, TransUnion, and Equifax will exclude tax liens and civil judgments from credit reports if the data does not include the borrower’s full name, address, and either a Social Security number or date of birth.

The credit bureaus say the new policy will take place on July 1, 2017. It will apply to new tax lien and civil judgment data added to credit reports, as well as existing data.

Many debt collection firms that take borrowers to court do not have all of the above identifying criteria when suing for unpaid debts. Therefore, the credit bureaus may eliminate most civil judgments resulting from unpaid debts from the credit histories of some borrowers.

This change springs from regulatory concerns raised by the Consumer Financial Protection Bureau (CFPB) earlier this month.

According to the CFPB, there have been 185,700 complaints related to credit report disputes since February 1 of this year. Consumers often complain that the credit bureaus include damaging inaccuracies on credit reports or disproportionately lower credit scores because of non-loan related debt.

And even after they dispute inaccuracies or issues and the credit agencies resolve them, consumers say their credit scores do not improve.

Since 2015, the three credit report agencies have reached settlements with more than 30 states over how they handled credit reports. They also now remove non-loan related items such as unpaid gym memberships and traffic tickets.

Additionally, all three credit bureaus will remove medical debt collections accounts that have been paid by a patient’s insurance company from credit reports by 2018.

How it will impact credit scores

Removing tax liens and civil debts could potentially cause credit scores to rise. Some consumers will appear more creditworthy thanks to these developments.

But even for those who will benefit, an increase in their credit scores will be modest. FICO projects that just under 11 million people will experience a score improvement of fewer than 20 points, according to The Wall Street Journal.

What’s more, lenders will still be able to check public records on their own to find information about tax liens or other debts, even if the credit bureaus don’t report it.

Still, lenders may be nervous about this change. Even a modest bump can make formerly ineligible borrowers suddenly eligible for loans or other forms of credit they would not otherwise receive. And that means lenders will be shouldering more risk when it comes to debt.

Will you see a change?

While some people will see an increase in their credit scores, the updates from the credit bureaus will not affect the majority of the population. Experts expect 12 million people in the United States to be affected. That’s only six percent of the population.

This is because the changes do not impact how the credit bureaus report common debts such as missed bill payments for rent or utilities, credit card debt, or student loans. These common forms of debt will stay on your credit report as they are today.

What you can do to improve your score

Before the changes go into place on July 1, you can take action now to ensure your credit report is in good shape and that your credit score is accurate.

One of the best ways to maintain an excellent score is to monitor your credit report regularly. Remember, you are entitled to a free credit report from each of the three credit bureaus once every year (get them at AnnualCreditReport.com).

You can collect all three credit reports at once or stagger reports and take out one every four months. The latter option allows you to check your credit throughout the year without having to pay for an additional report.

During your credit report review, look for any inaccuracies or fraudulent activity. It’s possible to find a simple mistake, such as an account belonging to someone else with a similar name listed on your report. If someone fraudulently took out a loan in your name, you can catch it early this way, too. By reaching out to the reporting credit bureau, you can have these items removed and boost your score.

Make sure you also keep up with the minimum payments on all of your debts, including credit cards, student loans, and car payments. Making payments on time significantly impacts your credit score in a good way.

Managing your credit score

While the changes made by the three credit reporting agencies are a huge shift in the industry, it is unlikely that these updates will dramatically affect many people.

So before getting excited about your credit score improving overnight, take stock of your current situation and identify areas for improvement. By taking an active role now, you can set yourself on the path to a more secure financial future.

For more information about improving your credit score, check out this article on how to get a 700 credit score (or higher).

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1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Finance Lender Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
  2. Personal Loans: Fixed rates from 5.49% APR to 14.24% APR (with AutoPay). Variable rates from 5.29% APR to 11.44% APR (with AutoPay). SoFi rate ranges are current as of December 1, 2017 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.29% APR assumes current 1-month LIBOR rate of 1.34% plus 4.20% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

2 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2017, the one-month LIBOR rate is 1.23%. Variable interest rates range from 6.02% – 15.97% (6.02% – 15.97% APR) and will fluctuate over the term of your loan with changes in the LIBOR rate, and will vary based on applicable terms and presence of a co-applicant. Fixed interest rates range from 5.99% – 16.24% (5.99% – 16.24% APR) based on applicable terms and presence of a co-applicant. Lowest rates shown are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with Citizens Bank at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, Citizens Bank checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Benefit: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
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