How Will the Latest Credit Report Changes Affect You?

If you haven't checked your credit score recently, you might want to give it a look -- you could be pleasantly surprised. The three major credit bureaus have put new rules into effect as of July 2017 that will cause credit scores to go up for many consumers.

Higher standards

Following a report from the Consumer Financial Protection Bureau that pointed out inaccuracies with credit reporting companies, the major credit bureaus have decided to add stricter standards for reporting certain types of public records.

Specifically, civil judgments (when you've lost a lawsuit and been ordered to pay) and tax liens (when the government puts a lock on something you own so that you can't sell it until you pay your back taxes) now must include your name, address, and date of birth or Social Security number, and must be updated every 90 days. This change in procedure means that all civil judgments and most tax liens from before July 2017 will be wiped off of consumers' credit reports.

Will your score change?

If you don't have a civil judgment or tax lien on your credit report, this change will have no impact on your score. However, if you do have such an item on your credit report, you'll likely see a credit score improvement of as much as 10 to 20 points. The lower your credit score, the bigger the leap upward is likely to be. While even a 20 point improvement won't make a huge difference in your overall credit rating, it's definitely a step in the right direction.

Effects of the new policy

Should your credit score improve thanks to the new rules, you'll find it slightly easier to get financing in any form -- and you may even be able to get a lower interest rate or reduced finance charges. On the other hand, if significant numbers of consumers qualify for better financing because of this change, lenders may simply "move the target" by shifting their credit requirements up slightly to compensate for the rules change. In that case, if you don't have a credit score increase from the new policy, you'll actually be slightly disadvantaged by the shift in credit requirements.

Again, it's unlikely that such a change would be very large, but if your score falls near one of the boundary lines that lenders are using to determine interest rates and other loan factors, then this change may be enough to bump you down to the next tier.

What you can do about it

Unless you are about to apply for a mortgage or otherwise have an immediate need for some form of financing, you don't need to take drastic action. However, improving your credit score is always a worthwhile goal; if this credit reporting change motivates you to start working on your score, so much the better.

Paying your bills on time and reducing your debt load are two ways to change your credit score for the better; if you have derogatory items on your credit report, the passage of time will reduce their impact on your score. As long as you're diligent, your credit score will steadily increase and you'll be able get access to better financing options at a lower cost.

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