Big Changes Coming to Your Credit Reports: What You Need to Know

Your credit reports are going through a major overhaul, and it's one that will help consumers. These credit bureau changes will take time to implement, but it's a nice change to go with the revamped FICO scores we saw last year.
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By Jonathan Roisman,

Your credit reports are going through a major overhaul, and it's one that will help consumers. Considered by some to be the broadest industry overhaul in more than decade, the three major credit bureaus -- Equifax, Experian and TransUnion -- agreed this week to be more proactive in credit card disputes and reform how medical debt is factored into someone's credit score. These credit bureau changes will take time to implement, but it's a nice change to go with the revamped FICO scores we saw last year.

Why are changes being made?

After a more than a year of negotiations between the State of New York, led by its attorney general Eric Schneiderman, and the three major credit bureaus, the two sides agreed to an overhaul of the system that will be implemented sometime in the next six months to three years. Although the agreement is between New York and the credit agencies, the changes will be implemented nationwide.

What are the changes coming to your credit reports?

Although this won't affect all consumers, it could benefit millions of people every year. For those who need to file a complaint regarding a credit report error or who have medical debt, these changes are big news.

1. New way of dealing with credit disputes. When anyone currently files a credit report dispute with one of the major credit bureaus, the process is automated. The bureau will send a letter to the lender reporting the supposed error. If you receive a letter, it means it's removed from your report. If the bureaus fail to respond or provide information confirming everything is correct, there is no error. Lenders generally have 30 to 45 days to prove their information is valid.

The major issue with this way of fixing errors is that the credit bureau is only confirming what the lender is saying and not the customer. If the lender's information is inaccurate, but there's still a record of it, there's a good chance the change won't be made. The new system will require an actual human agent to assess the dispute and confirm the information the lender provides is factual. The consumer will have an easier time proving documentation to an agent as to why the lender made a mistake, such as providing bank statements or proof of payment of a supposed unpaid debt.

Another bonus for consumers is that those who file a dispute with one of the bureaus will be allowed to get a second set of credit reports (instead of just one) in a one-year period from, to make sure errors that are said to have been erased actually are.

2. Medical debt will be calculated later. Twenty percent of Americans have unpaid medical debt on their credit report. A change to the credit reports overhaul will now give consumers who have had a medical debt sent to collections a six-month grace period before it shows up on their credit report. This is designed to give people time to pay off their medical debt without it affecting their credit scores. Consumers will have more time to reach an agreement with the service issuing their medical bills.

Even when an insurer pays a doctor or hospital late, the debt could get reported to a collection agency and negatively impact your credit scores. The extra 180 days is also designed to give enough time to help clear up those kinds of problems before they're sent to collections. When an insurer pays the delinquent debt, it now must be removed quickly by the credit bureau. Before it could stay on your report for as long as seven years. According to a 2014 Consumer Financial Protection Bureau study, more than half of all debt on a consumer's credit reports is medical. The average amount for someone with medical debt is just under $600.

Although the changes will take time to implement, this is a victory for consumers and their credit reports. For more information on credit report news and how to view your credit report and scores for free, read up on our comprehensive credit report monitoring page.

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