Posts Tagged ‘collection’

Credit scores on the rise

September 11, 2018

Some consumers credit scores are going up! A recent overhaul in the way the major credit bureaus factor in negative credit information is prompting millions of consumers’ credit scores to rise. The main reason? The removal of some collection items.

Over the past 12 months, collection items were removed from eight million consumers’ credit reports. The NY Federal Reserve said consumers who had at least one collection item/account removed from their credit reports saw on average an 11-point increase to their scores. Why the change in collection items being part of the credit score? Some collection categories often have mistakes/errors that lower potential buyers credit scores and keep them out of the borrowing market.

The three main bureaus (Equifax, Experian PLC, and TransUnion) all agreed to rework credit reports reports stemming from a 2015 settlement. In the settlement, some of the collection items removed were non-loan related items such as gym memberships, library fines, traffic tickets, and some instances of medical debt. This change would not include credit cards or loan related accounts. Those type of accounts that enter into a collection category will still negatively impact a potential home buyer’s credit score. any 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. According to an article in the Wall Street Journal, those seeing the biggest boost to their credit scores are those with a score in the mid 600s.

This is a great move by the credit bureaus. Sometimes it is easier to prove that one owes money with the account in good standing, and harder to prove one no longer owes a debt. Some debts such as tax liens, credit card collections, back taxes, car/student loans in default, etc. are easier to prove the debt is actually in arrears. Arguing about a library account in a city one may have lived in 5 years ago becomes troubling and difficult to prove. While these accounts aren’t being removed from a credit report/history, they are being ignored when it comes to producing the credit score.