12 million credit scores to go up, improving chances for consumers to get loans

If you're considering buying a home but your credit score is preventing you from purchasing...you may soon be in for a pleasant surprise! According to a recent report, Your credit history could improve, leaving you to make your next home purchase dream a reality!

Millions of consumers may soon witness a striking jump in their credit scores. Prospective borrowers can now qualify easily for mortgages.

A recent report by the Consumer Financial Protection Bureau outlined a number of problems it found with the big three consumer reporting companies- Equifax, Experian and TransUnion along with suggested reforms that could help consumers improve the accuracy of their own credit reports as well as those all-important three-digit scores.

The agency said Equifax, Experian and TransUnion had insufficiently quality control systems that failed to conduct reasonable investigations when consumers disputed something in their files.

"Equifax, Experian and TransUnion continually seek ways to ensure the data they maintain on their consumer credit files is accurate and current," Eric Ellman, interim president and CEO of the Consumer Data Industry Association, which represents the three major credit reporting companies, said in a statement to CNBC.

To that end, improved standards to new and existing public records in their databases will be implemented on July 1, the CDIA said. And as part of this change, some civil debts and tax liens will be excluded, which means some credit scores will edge higher.

Removing that negative information could boost scores for roughly 12 million consumers by up to 40 points or more, according to The Wall Street Journal. Analyses conducted by the credit reporting companies, along with FICO and Vantage Score, showed more modest credit scoring impacts.

On one hand, the removal of tax-lien and civil judgement data from credit reports may encourage more consumers to borrow but on the other hand, it might also increase the risks for lenders as they would not be able to determine borrower’s default risk accurately enough. As per the Journal report, consumers with lien or judgements are twice as likely to default on loan payments.


“It’s going to make someone who has poor credit look better than they should,” John Ulzheimer, credit specialist and former manager at Experian, told the Journal. “Just because a lien or judgment has been removed and someone’s score has improved doesn’t mean they’ll magically become a better credit risk.”

Sources: The Wall Street Journal and Mortgage Professional America

 

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