Policy Changes Could Mean Bankruptcy Impacts Your Credit Score Less

Starting on July 1st, consumers in Oak Park, Illinois and throughout the country may have started seeing changes to their credit scores despite making no changes to their personal finances. According to a recent article in MarketWatch, a new policy that took effect at the beginning of this month will result in around 12 million consumers seeing an uptick in their credit scores from all three nationwide consumer credit reporting agencies. In particular, having a record of consumer bankruptcy on your credit report may, in certain cases, have less of an impact on your credit score. What else do you need to know about the ways in which Equifax, Experian, and Transunion will be reporting credit scores from this point forward?
Consumer Credit Reporting Agencies Will be Gathering More Specific Information
As the article explains, Equifax, Experian, and Transunion, as of July 1st, “will begin collecting more specific information about the public records that are included on credit reports, including bankruptcies, civil judgments, and tax liens—which means consumers won’t be penalized as severely as they previously were for those black marks on their credit histories.” How will the consumer credit reporting agencies’ collection of data result in changes to credit scores?
The new rule requires that Equifax, Experian, and Transunion report all identifying information for the consumer (including name, address, Social Security number, and date of birth), and it also requires that the credit reporting agencies visit “courthouses to obtain newly filed and updated public records at least every 90 days.” According to the Consumer Data Industry Association, the consumer credit agencies were already supposed to be taking this extra step to ensure that personal bankruptcy reports were up-to-date, but they largely had not been doing so for civil judgments and tax liens.
One major change that will come with the new rule is that civil judgments will not remain on a consumer’s credit report “because they do not meet the new standards,” according to the article. Some tax liens, but not all, will remain on credit reports. It is important to note that consumers do not have to do anything in order to have damaging records removed that do not meet the new standards. Instead, such changes should be reflected in their credit reports after the July 1st date.
Small but Significant Changes in Credit Scores
Experts predict that consumers will see, on average, a credit score increase of 10 points. While that number might not sound like a lot, just 10 points can bump a consumer into a different credit score bracket. For instance, it might move a consumer from a “fair” credit score category into the “good” category. Such a distinction can help consumers to obtain loans at better rates.
While changes to the credit reporting system are not likely to have a major impact on consumers who already have very good or excellent credit scores, the changes will have a positive effect on those who are struggling to obtain credit and to get loans at reasonable interest rates. In particular, consumers who have certain tax liens or civil judgments that have been impacting their ability to obtain credit are likely to see a drastic improvement in their prospects.
Learn More by Speaking with a Consumer Protection Lawyer in Oak Park
Do you have questions about improving your credit score, or concerns about how bankruptcy will impact your credit report? An experienced Oak Park consumer protection attorney can speak with you today. Contact the Emerson Law Firm for more information.
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