Thanks to a 2015 settlement agreement between the New York Attorney General and the three credit reporting agencies, some important changes are on the way in regards to credit reporting. An additional agreement between the credit reporting agencies and another 31 state attorney generals ensures that the change will be nationwide. The changes are being made in three phases with the most noteworthy and significant being phase three which started in September and must be implemented by June 8, 2018.
The most crucial aspect of this is around medical collections:
- The credit bureaus – Experian, Trans Union and Equifax will reject any credit reporting of a collection that is not at least 180 days old. This gives the consumer time to pay the collection before it is reported.
- Medical collections that are paid (or are being paid through insurance) will either be removed or suppressed from credit reports.
- Collection accounts that have not been updated on a credit report for six months or more will be periodically removed or at least not factored into the scores.
- The credit reporting agencies will remove the reporting of any collection that did not arise from a contract or agreement to pay by the consumer. These would include collections for traffic tickets or library fines.
This could have a significant impact on a consumer’s credit scores. A collection account, even for the most minor thing, can affect a consumer’s score by 100 points or more. Not having those collections factored in or having them removed will open the doors for a lot of consumers that could not qualify before.
100 points is a big deal when you’re considering buying a home – it could mean the difference in whether or not you’re able to buy a home or what interest rate you’ll be able to get. Call us at 480.758.3070 if you’re considering buying a home and we’ll be more than happy to introduce you to some of our clients favorite lenders that will help get you in a position to buy a home this year!