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Clarification on Upcoming Changes to Credit Reports

There have been a lot of questions cropping up surrounding the changes coming in June to credit reports. These changes are due to the settlement agreement from 2015 between the credit bureaus and state’s Attorney Generals. The last phase of this agreement is set to be in place as of June 8th, 2018. Due to the questions around this, there are some things that need to be clarified.

Medical collections that are paid (or are being paid through insurance) will either be removed or suppressed from the credit report. It does not mean that all medical collections will completely go away, some may still show up on the report; however they are no longer supposed to be factored into the scores. How the bureaus are going to determine if it is paid or being paid by an insurance company is not known at this point. And it doesn’t mean that collection agencies will suddenly cease reporting the accounts. This directive dictates to the bureaus, not the data furnisher. So there will still be some medical collections that do show up on credit reports.

For mortgage companies that utilize the “rescore” process with their Credit Reporting Agencies this also does not mean that a rescore can simply be done to remove a collection because it should have come off or should be suppressed from the scoring models. A letter would still have to be obtained from the collection agency saying the account should be removed in order to have it removed through a rescore.

Collection accounts that are collecting for something other than medical will still appear on the credit report and will continue to be factored into the scores, as will charged off accounts. The only other collections that should not appear on a report any longer are any collections that that did not arise from a contract. Examples of this would be library fines or traffic tickets which are often turned over to outside collection agencies. The one variance from this would be if it’s a collection that has not reported in the last six months. Any collection (not charge off) that has a reporting date older than six months ago will be periodically removed by the bureaus. This again, does not mean that the collection agency will not come back and re-report the account, they very well may do that and are within their rights to if that is what they decide to do. If the reporting date is within six months the collection will still be there.

The bureaus will also reject any reporting of a collection that is not at least 180 days old. This will give the borrower a chance to pay it before it’s ever reported to a credit bureau. If it’s over 180 days old since the account went into the collections, then the bureaus can and will accept the reporting from the collection agency.

There are other changes to credit reports that will come about because of the settlement but none as significant as what will be happening with collection accounts.

When this change is initiated I am sure there will be glitches which will lead to frustrations with the credit report. It will just take time for the bureaus to all get in sync and have the appropriate information reflected on the credit report.

Please feel free to contact mindy@advcredit.com if you have any questions regarding these changes.

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