Millions of Consumers Getting a Credit Score Boost

An overhaul in how several major credit reporting agencies factor in negative credit information is prompting millions of consumers’ credit scores to rise. Collection events were struck from 8 million consumers’ credit reports in the 12 months ending in June. The New York Federal Reserve reported Tuesday that consumers who had at least one collections account removed from their credit reports are seeing an 11-point increase to their scores.

Critics have long claimed such dings to scores are prone to errors or that they’ve unfairly kept many out of the borrowing market. Equifax, Experian PLC, and TransUnion have all agreed to revamp reports, which stems from a 2015 settlement with state attorneys general on the matter. In the settlement, the firms agreed to remove some non-loan related items that were sent to collection firms, such as gym memberships, library fines, and traffic tickets. They also agreed to strike medical-debt collections that have been paid by a patient’s insurance company.

Source: “Overhaul Boosts Credit Scores of Millions of U.S. Consumers,” The Wall Street Journal (Aug. 15, 2018)

Moving from ‘Renting to Homeownership’ could get easier!

Adding in rental history to a credit score could make all the difference for potential homeowners, according to an article in Businessweek.

Experian published an analysis on almost 20,000 people in government-subsidized housing who pay their monthly rent on time. The survey found that before adding in rental history, 11% of the same had no credit file at all, which makes it extremely hard to get loans. However, once the rental history was included, 59% of that group had prime credit scores, and another 38% had “nonprime” scores, while only 3% were considered subprime.

As reported back in June, mortgage lenders might start considering rent payment history in credit scores. In the current system, years of monthly payments to landlords do not show up on credit-bureau files.

Two of the national bureaus — Experian and TransUnion— have begun incorporating verified rental-payment data into credit files where it can be included in the computation of consumers’ scores when they apply for a mortgage.

Source: Businessweek