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Credit bureaus are changing their reporting structure and that’s great news for you

3 minute read

If your credit report suffers from tax liens, civil debts, unpaid traffic tickets, or medical debt, the dark times may be over.

A class-action lawsuit two years ago forced the three major credit bureaus — TransUnion, Equifax, and Experian — to change how they handle credit reports. Those changes can only help you, and they’re now starting to go into effect.

Your credit is vital for nearly every major money decision you make — from buying a home to getting a credit card. If you’ve had bad marks on your report because of things like overdue medical bills, it’s worth taking a look. It’s free, and you should be looking at least once a year anyway.

Previously, minor infractions left major black spots on your otherwise stellar credit history, which is all used to calculate your credit score — what lenders look at when you apply for any kind of credit or even to rent an apartment. If you’ve ever been late in paying a traffic ticket or another small fine, that delay probably cost you good deals.

Now those penalties will be wiped away or changed so they won’t affect you in the future, thanks to the National Consumer Assistance Plan. The plan was launched in 2015, after that class-action lawsuit, to improve the quality of consumer credit information. Here’s what’s coming…

Changes you’ll see right now

Starting this month, both civil judgments (when you’ve lost a lawsuit and had to pay) and tax liens (where the government holds onto property or assets until you pay old taxes) will be removed from your credit report completely. If you had either of those worries, your score could get a decent boost — as much as 40 points!

You can also expect to see more accurate and detailed reporting. The NCAP will require debt collectors to include the original creditor information with each account being reported for collection. Until now, you often saw a company name you had never heard of (some debt collector) instead of the company you didn’t repay. Now it’ll be easier for you to know who you’re paying your money to and make sure you aren’t getting scammed.

Debt collectors will also be required to continuously update the status of unpaid debts and remove debts that are no longer outstanding. Before, an old debt would stay on your credit report for years after you paid, weighing down your credit score. Now once it’s removed, it’s like it was never there at all.

The new plan also includes making sure your report is updated at least every 90 days and must include basic details like your name, address, and Social Security number. This will cut down on cases where your report gets mixed up with someone else’s credit history if you share the same name.

Changes you’ll see soon

Almost one third of consumers have at least one debt collection on their credit report, according to a 2014 Consumer Financial Protection Bureau study. And of those, 20 percent are medical collections.

Medical bills are already confusing enough, as doctors, specialists, and hospitals can bill separately — for the same visit! After some back and forth with insurance companies, hospitals, and whoever else you must pay for medical work, it could take months for payment to go through. Any mix-ups or delays leave just one person with a black eye: You. Right now, medical debts show up once they go into collections, but that’ll change come September.

Soon, medical debts will get a 180-day waiting period before showing up on credit reports. This lets consumers and insurance companies work through payments so they won’t negatively impact your credit report. This is huge news: if you’ve ever had an emergency room stay or extensive medical work that resulted in outstanding bills, they may have gone unpaid for months through no fault of your own. This hurt your credit score, and meant any future loans you tried to secure — or even an apartment, where they check your credit to make sure you’re responsible — suffered.

You can also look forward to changes in old medical debt that has long been paid off. The plan says any medical collections that have been paid off or are currently being paid by insurance will be removed from reports. It’ll be like the debt didn’t even exist — which is how it should be.

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About the Author

Dori Zinn

Dori Zinn

Zinn is a freelance journalist based in Fort Lauderdale, Florida.

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