Will This New Bill Help Your Credit Score?

A new bill could dramatically change the U.S.’s credit reporting system as we know it.

The 202-page Comprehensive Consumer Credit Reporting Reform Act of 2016, introduced by Rep. Maxine Waters (D-Calif.) late last month, would, most notably:

Shorten the time most adverse credit information stays on reports to 4 years. Paid and settled debts would be removed even faster — 45 days after from the date of payment. (Currently, most negative information remains on credit reports for 7 years.)
Restrict the use of credit checks for employment purposes. (Federal law currently permits employers to view a version of a person’s credit report as part of their application process.)
Put the onus of proof in credit reporting disputes on the credit bureaus and data furnishers, instead of the consumer.
Give private student loan borrowers the ability to have adverse information removed from their credit reports after they make consistent loan repayments for a certain period of time, similarly to relief that already exists for federal student loan borrowers.
Expand access to free credit reports and credit scores.
Provide credit relief protections to the victims of predatory lending practices.
Provide the Consumer Financial Protection Bureau explicit authority to monitor the development of credit scoring models.

Waters’ office said the sweeping reform is intended to make the credit reporting system fairer, more accurate, and less confusing for consumers.

“This bill will bring much-needed accountability to the credit reporting industry, which will enhance consumer and creditor confidence in the integrity of information on reports and restore fairness in the system,” the congresswoman said in a press release.

This isn’t the first time legislators have pushed for credit reporting reform. In fact, the bill builds on a draft proposal Waters revealed back in 2014. She also previously introduced a bill that would require consumer reporting agencies to remove any information related to fully paid or settled medical debt from a consumer’s credit report within 45 days. Sen. Elizabeth Warren (D-Mass.) and Rep. Steve Cohen (D-Tenn.) introduced legislation back in 2015 that meant to prohibit employers from requiring prospective employees to disclose their credit history as part of the job application process.

Despite these efforts, the nation’s credit reporting system has seen little in the way of legislative change since an amendment to the Fair Credit Reporting Act granting consumers access to free annual credit reports passed back in 2003. In 2015, attorneys general in 31 states did get the major credit reporting agencies to agree to make changes in the way they address errors and how some negative information is added to credit reports as part of a $6 million settlement last year. And newer versions of many major credit scoring models, including new FICO scores, are now excluding paid medical debts from their calculations.

”We haven’t yet reviewed the proposal in detail and cannot comment on individual proposals found in the bill, however in light of our members 2015 announcement of the National Consumer Assistance Plan and the broad powers the CFPB has today to examine and generally oversee our members’ practices we question the need for any additional law,” Stuart K. Pratt, president and CEO of the Consumer Data Industry Association, a trade organization that represents the credit bureaus, said in an email.

Waters, who has the backing of many consumer advocacy groups, is working to drum up support for her latest proposal in the House and the Senate.

Dealing With Bad Credit

Consumers currently saddled with bad credit may be able to improve their scores by disputing errors on their credit reports (you can go here to learn how that process currently works), paying down high credit card balances and limiting inquiries for new credit while scores rebound. You should also check your credit to identify your specific credit score killers and then come up with a game plan to address those issues. You can monitor your progress by viewing your two free credit scores, updated every 14 days, on Credit.com.

Remember, you can build good credit in the long-term by making all loan payments on time, keeping debt levels low and adding a mix of loan accounts over time.