Credit scores may jump thanks to new scoring rules enacted after CFPB study
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https://www.usatoday.com/story/money/personalfinance/2018/04/16/credit-scores-may-jump-month-thanks-new-scoring-rules/515831002/
Starting this week, some consumers may have a higher credit score. Because of improved standards for utilizing new and existing public records, the three major credit reporting
companies are now excluding all tax liens from credit reports. That means some scores will head higher, for some by as much as 30 points.
The new rules come following a study by the Consumer Financial Protection Bureau that found problems with credit reporting and recommended changes to help consumers.
(Incorrect information on a credit report is the top issue reported by consumers, according to the bureau.)
Last July, credit reporting companies removed nearly 100 percent of civil judgment data and about 50 percent of tax lien data from credit reports. Now they will remove the rest. The
latest change will take effect April 16. LexisNexis Risk Solutions predicts that about 11 percent of the population will have a judgment or lien removed from their credit file, according
to the company's own estimate.
Once that information is stripped out, credit scores may go up by as much as 30 points overall, LexisNexis found. LexisNexis also provides lenders with data to make decisions on
consumer loans.Other industry groups have said these changes will have less of an impact. "Analyses conducted by the credit reporting agencies and credit score developers
FICO and VantageScore show only modest credit scoring impacts," Eric Ellman, a senior vice president of the Consumer Data Industry Association, said in a statement when the
changes were first announced. The association represents Equifax, Experian and TransUnion, the three largest credit reporting companies.
A follow-up report by the CFPB found that only a small number of consumers who had civil judgments or tax liens removed from their reports in July experienced a jump significant
enough to improve their credit profile. Still, for consumers who are not directly affected, there could be consequences as well. If banks are less able to differentiate a risky borrower
from a nonrisky borrower, "lenders and servicers have to hedge for that risk," said Nick Larson, a business development manager for the financial services unit of LexisNexis Risk
Solutions. As a result, lenders will have to charge higher interest rates across the board, he said. "Overall, consumers actually get hurt."
Great news, now more people (probably unsuitable people) can get into debt.
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