Some exciting news may be on the horizon if the thought of pulling up your credit score makes you cringe a little. Millions of people are about to get bumps in their credit scores this summer. This could be good news for you if you've been planning to apply for a new loan.
Changes Are Coming To How Credit Scores Are Determined
July 1 is going to be a big date for many Americans because that's the day the nation's three big reporting companies will change the way credit scores are rated. Equifax, Experian and TransUnion have announced that they will be reevaluating two key pieces of information that go into determining a person's credit score.
Tax liens and civil judgments have been dragging down the credit scores of many people for quite some time. However, recent lawsuits in more than 30 states are forcing companies to take a second look at how much power these factors should have when it comes to determining an individual's credit score.
It appears that liens and lawsuits have been attributed to the wrong people in a number of situations. This means that people with clear records have been forced to deal with the repercussions of having legal and financial issues on their reports. This is a big deal because dings caused by legal and financial issues stay on credit reports for seven years.
A New Process For Creating Accurate Reporting
What will Equifax, Experian and TransUnion be doing differently to ensure that tax liens and civil judgments aren't wrongly attributed on credit reports? A new system is being put in place that will check each lien or judgment that is reported against four key pieces of information.
A lien or judgment will be deleted if it does not match up with at least three of the four pieces of information. Every lien or judgment will be matched up against a person's name, address, date of birth and Social Security number before it sticks to a credit report.
How Many Reports Will Be Affected?
Mistakes on credit records create a big problem for many people who are looking to attain loans, credit cards and mortgages. What makes the situation even more troublesome is that most people don't realize that a piece of inaccurate information has been attached to a credit history until it's time to fill out a loan application or apply for a credit card.
A poor credit score can even cause people to fail background checks in some circumstances. It can then take months or years to finally get the inaccurate information removed. It is possible that up to 11 million consumers will see their scores raised by as much as 20 points once the new reporting measures are put into place in July.
This is significant because even a small increase can bump up a credit score into a new category. How can you check your score? Don't forget that every individual is entitled to one free copy of their credit report from each of the three national reporting companies every 12 months.
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