Credit-reporting settlement: the bar is raised

Monday, March 23rd, 2015
Updated: March 23rd, 2015
The content is accurate at the time of publication and is subject to change.

The three big credit bureaus have reached a settlement with New York’s attorney general Eric Schneiderman. The settlement overhauls how credit bureaus will handle errors on credit reports and medical debts.

TransUnion, Experian, and Equifax collect data and maintain credit reports on more than 200 million Americans. The data is used to create credit scores which can determine who gets a loan and how much interest is paid on it. An error on a credit report can result in lower credit scores, making it harder for consumers to get financing. Credit reports with negative information can also become an obstacle for those trying to rent an apartment, getting a car loan and mortgage, or even finding a job.

Now the three credit bureaus are making changes that will improve credit report accuracy, increase the efficacy of error dispute procedures, and protect consumers from unfair harm to their credit histories due to medical debt. Most of the changes will apply nationwide and will go into effect over the next 6 months to 39 months.
Here are the changes which will affect consumers.

Improvement of dispute process
Consumers will have more protections when they find an error on their credit reports. The settlement requires the credit bureaus to employ specially trained employees to review the documentation submitted by consumers for all disputes. Consumers who find errors should submit an exhaustive documentation to prove the information on their reports is inaccurate.

Medical debt
Most of collection items on credit reports are medical debts. The complexity of medical billing and insurance often results in medical debts that end up on credit reports. Therefore, medical debt may not accurately reflect consumers’ creditworthiness.
The settlement requires the credit bureaus to wait 180 days before medical debt will be added on a credit report. This can be enough for consumers to resolve the delinquencies that result from insurance delays or disputes. In addition, the medical debts will be removed from a consumers’ credit report after the debt is paid by insurance.

Additional free credit report
It is a well known fact that consumers can check their credit reports for free from each of the three credit bureaus once a year at AnnualCreditReport.com. Now the agreement requires the credit bureaus to provide a second free credit report to consumers who are involved in disputes and have a change made to their credit reports. This will allow consumers to confirm if the correction to their credit reports was made.
These are the biggest changes to the credit reporting system since the 2003 Fair Credit Reporting Act, which gives the right to consumers to get a free annual credit report and outlined a dispute process to correct errors.

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