It’s more important than ever to keep on top of your credit reports and credit scores — especially since a host of new changes are on the horizon in the world of credit reporting.
In 2015 and beyond, a slew of credit reforms and revised credit-reporting policies are slated to take place that could affect your credit score, mostly in positive ways, for years to come.
Here are three key updates you need to know that may help your future credit rating.
Disputing errors on your credit reports becomes easier
Under a new agreement announced in March 2015 between the three credit bureaus (Equifax, Experian and TransUnion) and New York Attorney General Eric Schneiderman, the credit industry is overhauling the way it handles disputed and erroneous information in consumers’ credit reports.
The overhaul is being dubbed The National Consumer Assistance Plan and it “will enhance our ability to offer accurate reports and make the process of dealing with credit information easier and more transparent for consumers,” said Stuart Pratt, president and CEO of the Consumer Data Industry Association, a trade group.
Among the changes: the credit bureaus will soon have specially trained employees to review all supporting documentation submitted by consumers for all disputes involving fraud, identity theft, or when a consumer’s credit data gets mixed up with someone else’s file.
“This agreement addresses some of the most egregious problems in credit reporting that consumer advocates have complained about for many years,” said Chi Chi Wu, an attorney with the National Consumer Law Center.
Medical debts, certain other bills won’t hurt scores
In May 2014, the Consumer Financial Protection Bureau issued a report suggesting that medical debt, which now accounts for more than half of all unpaid debt in collection, should not be factored into credit scores.
In the wake of that report, the FICO credit score, and the VantageScore 3.0 will not count medical debts against a consumer when computing a person’s credit score.
Reducing the impact of medical debt on credit scores is seen as a big win for consumers, especially since the credit bureaus will start playing a role too.
Under the National Consumer Assistance Plan, in the future there will be a 180-day waiting period between the time a medical account is created and the time it can be reported on a person’s credit report as due for collection. The idea is to minimize medical collection accounts on consumer credit files by giving consumers and medical providers time to work out insurance and other billing issues that may arise.
What’s more, under the plan, the credit bureaus have agreed that various other consumer debts, like parking tickets and traffic or government fines, will no longer be put on people’s credit reports.
These various policies, including the new process for disputing credit information, will be implemented over a time frame ranging from six months to three years, according to Norm Magnuson, the Consumer Data Industry Association’s vice president of public affairs.
“The goal is to make sure that the first time a consumer disputes something, all three parties involved — the consumer, the credit bureau, and the data furnisher or supplier of the information — are all in sync,” Magnuson said.
Rent payments get added to credit reports
Currently, if you live in one of America’s 40 million renter households, your rent payments don’t automatically get added to your credit files. But that’s starting to change.
Several years ago, Experian became the first credit bureau to add rental data to consumer credit files. More recently, Experian and TransUnion have each issued separate research reports illustrating that consumers overwhelmingly benefit by having rental payment history included in their credit reports. In most cases, even adding just one month’s worth of rental data was enough to boost a person’s credit score.
Matt Briggs, the CEO of RentTrack, a company that lets landlords report tenants’ monthly rental payments, said he can foresee a time in the future when it’s standard practice for rent payments to get routinely added to credit reports, just like mortgages.
“Rent payments are absolutely going to be the norm…” he said. “The fact is rent is often your largest monthly expenditure and you should get credit for it.”
Briggs noted that his company also recently published a long-term study that found that the average overall score increase for residents reporting rent was nine points. For sub-prime renters, with scores less than 650, the average increase was 29 points.
“For many, rent payment reporting is the only way to build credit without debt,” says Briggs.