Since its beginning in 1989, there have been little, if any, changes to credit score reporting. However, with the advancements in technology and an economy struggling from a worldwide pandemic, it only makes sense to re-evaluate a system that can determine a person’s housing or place of employment.

And that’s what is happening. Congress is now considering significant changes to the thirty-two-year-old process to restrict some uses for credit scores, like consideration for employment or housing. Also, in the review are changes in the time and types of debt included. For example, medical debt would be reported differently than other debt. The proposed too is to report rent and utility payments to help those with little or no credit. 

One of the most significant changes is who would be in charge of credit reporting. Currently, three private companies provide reports. Those companies are Equifax, Experian, and Transunion. One proposal provides for the creation of a government agency to create reports. Keep reading for additional information on credit score reporting and how it might affect you. 

Prohibiting the Use of Credit Information for Employment or Other Purposes

Under the new guidelines, employers would no longer be allowed to use a credit score to determine eligibility for employment. Other businesses that use credit reports are utility and insurance companies. Some states do not allow insurance companies to use credit information for policy-making purposes. If these changes occur, this could affect how insurance companies charge consumers for policies.

Reducing the Amount of Time Information Is Included

Now, delinquent accounts remain on the report for seven years. Under the new proposal, information would only stay on the report for four years. However, bankruptcies could still be reported for seven years. 

Medical Debt Guidelines Changed 

Debt accrued for medical reasons may no longer be reported under new rules. Or if so, it may not be recorded for a year after the charges so that the debtor can have additional time to settle the debt. 

If a consumer has a good credit history up until the pandemic but fell behind on payments due to a job loss during the pandemic, the new system would not penalize them for late payments or any accrued debt during this time. 

Adding Subscription Services, Rent Payments, and Utilities 

In the future, subscription services like Netflix could be used on your credit report to determine creditworthiness. Experts believe that adding these services would give a better overall view of credit history. Especially to people who may be roommates or rely on rideshare services instead of buying a car. 

The New FICO 10 Reporting 

In 2020, the Fair Isaac Corporation announced that they would begin taking consumers’ debt levels into account when computing a credit score. As a result, 110 million consumers could see their scores change, and not necessarily for the better. New debt, not paying on time, or taking out personal loans that lenders may see as riskier loans because there’s no collateral associated with the loan, could cause a score to decline at least twenty points. FICO estimates that 80 million people could be affected by this change. Not all lenders will use this model. Some will continue to use the FICO 9, which was released in 2014. Consumers can offset these changes by continuing to pay their bills on time, be cautious of taking out personal loans, and keep their balances low. 

Pros and Cons of the New Guidelines 

  • There’s no clear idea on how this would work. 

Taking the process away from the three companies that have handled reporting would leave the government responsible for millions of records. Who would control all this information, and how? Those questions have not been answered. 

  • It could make it easier for young people to obtain credit. 

In the past, getting credit has been a catch-22. Without the ability to get credit, and therefore a credit score, banks and creditors have been hesitant to lend to people with no credit. Having more sources to pull from will be easier for people to build the credit they need to buy a house or car. 

  • It could make it easier for minorities to obtain credit. 

While a credit score was intended to level the playing field of credit, history has proven this hasn’t always been the case. However, changes to these guidelines could make credit more accessible for all. 

When Might These Changes Take Place? 

The Comprehensive CREDIT Act and the Protecting Your Credit Score Act of 2021 both passed the House of Representatives and are currently under consideration again. And the current administration is in favor of passing a bill to overhaul the credit reporting system. 

What You Can Do Now to Keep a Good Credit Score

A lack of financial literacy has kept some people in the dark about credit scores and how they are generated. For instance, paying off debt could lower your score, which could be detrimental if you are considering buying a new home. Here are some things you can do to keep a healthy credit score: 

  • First, pay bills consistently on time. 
  • Keep your credit card balances low. The higher the balance, the lower the score. 
  • Limit applications for new credit. Too many inquiries will lower your score. 
  • Closing out your credit card accounts can lower your score. 
  • Fourth, be sure to check your credit report for inconsistencies or identity theft. 
  • Budget and goal set. 

While it looks very likely that credit reporting will change, there’s no set timeline yet. As Congress and the House meet to discuss these bills, more information will become available. 

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1 Comment

  1. Of course this was all done to benefit the dredges of society who don’t follow the rules anyway. The rest of us that do, see no benefits are will remain under the gun. Welcome to black America.

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