Home > 2015 > Credit Score

How Your Credit Score Could Rise Soon Without You Lifting a Finger

Advertiser Disclosure Comments 9 Comments

Big changes are coming to both credit scores and credit reports – some as soon as September. Thanks to a combination of state lawsuits, federal regulation and old-fashioned competitive pressures, the way Americans are graded on their ability to pay back loans is about to enter a bit of a Renaissance. The changes probably won’t come as fast as you’d like, but they are coming, so here’s a guide.

Credit Report Changes

Most of the changes to credit reports are the result of a settlement reached earlier this year between the credit reporting agencies and a group of state attorneys general. The biggest change: some events that would have been a blemish in the past will no longer appear on consumers’ reports, a welcome change for borrowers.

Unpaid medical debts – medical collections represent roughly half of all collection accounts on credit reports, according to the CFPB – will be treated very differently. The bureaus will institute a 180-day waiting period before they enter medical debt onto a consumer’s report. Many health-related debts are the result of insurance confusion and other innocent mistakes, so consumers will now be protected by this grace period.

In addition, medical debts that had been considered delinquent but have since been paid by insurance will be removed from credit reports. Ordinarily, “paid late” notations remain as blemishes even after consumers pay off a debt.

The AG settlement includes several other consumer-friendly changes too, such as a requirement that the bureaus do a more thorough job of investigating consumer disputes. Specifically, they must employ specially trained experts to handle disputes involving identity theft, mixed files or fraud; and they must allow for human intervention when a lender and a consumer disagree about a debt. The bureaus must also get better about sharing information with each other when consumer credit reports errors are discovered.

Some smaller, technical changes required by the settlement will take effect this September. Suppression of medical debt entries that were ultimately paid by an insurance company will be required by September 2016. Unfortunately, the most important changes — the 180-day delay in medical debt reporting and more thorough review of consumer disputes — aren’t required until June of 2018.

Credit Score Changes

Fortunately, changes to the way credit scores are calculated — many that directly reflect the issues raised in the attorneys general settlement — have already taken effect in the latest scoring formula published by FICO, known as FICO 9.

Unfortunately, FICO formulas are a bit like software upgrades, and it will take time — perhaps years — before banks adopt or integrate FICO 9 into their own scoring formulas.

Still, the adjustments in FICO 9 are good for consumers. FICO has changed the impact that unpaid medical debt has on scores, reflecting the firms’ research that unpaid health bills don’t typically equate to bad payment habits. Essentially, unpaid medical debt won’t have the same drag on scores as other unpaid debt.

“The median FICO Score for consumers whose only major negative references are medical collections will increase by 25 points,” FICO says.

The new formula will also help consumers who are digging their way out of debt. Bills sent to third-party debt collectors that are paid in full will no longer count as negative entries in the FICO 9 formula.

Meanwhile, there’s a continued drumbeat for credit scores to include other non-traditional factors. Credit bureaus TransUnion and Experian have both released studies in the past year suggesting that inclusion of payment histories from non-banking entities such as landlords or utilities would boost millions of consumers’ scores. Borrowers with “thin” credit histories, such as young adults or immigrants, could be heavily impacted by such a change.

Consumers can get their credit reports for free once a year from each of the three major credit reporting agencies through AnnualCreditReport.com — this can help you check your report for errors or other issues. There are also many ways for consumers to track their credit scores for free — including two monthly credit scores through Credit.com — to watch for any major changes that could signal a problem.

More on Credit Reports & Credit Scores:

Image: Creatas

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • Whiteshaddow

    Unfortunately the real issue is being circumvented. Credit should only be extended based on the ability to repay, not by looking through a rearview mirror. % of income thresholds would prevent a lot of the BS that is happening today; bailouts, bankruptcies, tax payor funded inequity resolutions, etc. While it is nice to see changes which appear to be a ‘step’ in the right direction, it is disheartening to see so much work, resources, and time going into these types of activities versus addressing the heart of the matter at it’s core.

  • WM

    Its about time. Theres alot of people that have bad credit scores. Not because they dont pay their bills, but because of medical bills.
    The credit bureuos are not on the side of consumers. But on the side of the creditors or collection agencies.
    You can dispute a debt and they refuse to remove it if they say the creditor verifies it.
    In my case the debt’s was discharged in a bankrupcy. Kdmc just put the debts back on my credit report and changed the dates. Like it was after the bankrupcy.
    I have disputed them with all three bureuo’s and just recieve letters. Debt was verified and will remain.
    I hope they do have to change their actions and quit ruining peoples lives.
    The way it is now is corrupt and unfair to the consumer.
    Any creditor can put anything they want on peoples credit reports. But if you try and get them removed it is a big nightmare.

  • Netty D

    One should never live beyond there means! Because you never know when the bottom is going to fall out of the financial world! or becoming unemployed! Enron! Freddie Mac! But there was no mention of Student loans.

  • http://billcollectorshateme.com/ Bill Collectors Hate Me

    This is very good news for all of us and a long time coming!

  • tj

    I would prefer to lien to people who have a low credit report because (if not due to bad debt) for example, I didn,t owe anyone ( after a long history of car payments, mortages owing over $400,000 and a credit rating of 840) except one credit card that never carried a balance, was paid in full each month and my credit score went down in the 600. Does that make any since. Over a 20-30 yr history of paying on time to one credit card payment in full each month, who hold a risk of bad credit, not the one with 0 balances, new laws should address this situation. Couldn’t get an auto of .09 because score in the 600 with evidence that all the years credit was paid on time until 0 balance..

    • http://www.credit.com/ Credit.com Credit Experts

      Are you sure? It’s actually possible to have a good score without debt. You can read more about that here:
      How to Improve Your Credit Score Without Debt. You can also take a look at your free credit score from Credit.com. It includes an analysis of the factors that determine your score and personalized advice for improving it.

  • http://www.credit.com/ Credit.com Credit Experts

    You can attach a note to your credit report, but that won’t undo the damage to your score, unfortunately. (Unless you happen to live in Texas . . . then you may have some options.) The best news we have for you is that time (and positive information on your credit reports) will reduce the impact of the negative. It will not hurt to send your documentation to the original creditor and to ask them to pull it back from the collectors. If this is not possible, you can try it with the debt collector, and ask that it not be reported. Trying with the credit reporting agency is also a possibility, though they will go to the collector . . . and if the collector verifies the information, it will stay on your report. However, if the collector does not reply or does not verify, the information has to come off your report. Bottom line: You have nothing to lose by trying, but you might want to try with the data furnisher first.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team