Here’s Why Credit Scores Are Going Up (and How to Know If Yours Is, Too)
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Last year brought big changes to the way credit scores are calculated, and now millions of Americans are seeing those changes on their credit reports.
In July 2017, the three major credit bureaus — Equifax, Experian and TransUnion — started implementing new requirements for public records data, such as tax liens and civil judgments, that appear on consumer credit reports.
Now, that data must include your name, address, date of birth and Social Security number, and the information must be refreshed every 90 days. If these requirements aren’t met, the record is excluded from your credit report.
The changes are part of the National Consumer Assistance Plan (NCAP) launched by the three major credit bureaus in 2015 in response to complaints about credit reporting inaccuracies.
NCAP also removed unpaid traffic tickets, library fees and other fines that didn’t arise from an agreement with the consumer.
There were also big changes to how medical debt is reported. Until 2017, medical debts could appear on credit reports at any time, even if the unpaid bill was only 30 days past due. Now, credit bureaus must wait 180 days before including medical debt on reports. Bureaus must also remove that debt from credit reports when the debt is paid.
The Impact of the Latest Credit Score Changes
So how did the changes really affect credit scores?
About 8 million collections accounts totaling $11 billion dollars were removed from credit reports between June 2017 and June 2018, according to a report from Federal Reserve Bank of New York that analyzed millions of anonymous Equifax credit reports.
The average score increased 11 points; however, 18% of reports analyzed increased by more than 30 points. Around 20% of scores decreased, likely because unrelated negative items were added during the same time frame.
The report says the removal of third-party collections accounts was the biggest factor in the increase.
About half of all tax liens were removed from consumer credit reports, along with 97% of all civil judgments, according to American Banker.
Did These Changes Affect Your Score?
There is quite a bit of confusion surrounding credit reports. Some Americans don’t know where to find their credit reports, while others aren’t exactly sure what a credit score is or how it affects them. Some even believe checking their credit reports will hurt their scores (which is not the case).
So how do you know if your score was affected? Unless you’ve been keeping an eye on your score, you may not be able to tell the difference. The Fair Credit Reporting Act gives you the right to obtain a copy of your credit report from each of the three credit bureaus once a year for free. You can request your reports here.
To keep a closer eye on your credit, you can get your score and a “credit report card” with monthly updates for free from Credit Sesame. It’ll break down what affects your score in plain English and offer tips to better manage it.
Jessica Gray is an editorial assistant at The Penny Hoarder.