Attempting to fix an incorrect entry on a credit report can be a long and arduous process. Thankfully, the recent overhaul of the credit reporting industry will help alleviate some of the pain. The agreement, which was sparked by a 2012 investigation, will require the three major credit reporting agencies (Equifax, Experian, and TransUnion) to pay $6 million to 31 states over the course of three years.
The Cheat Sheet spoke with Beverly Harzog, credit expert and author of the book The Debt Escape Plan: How to Free Yourself from Credit Card Balances, Boost Your Credit Score, and Live Debt-Free to learn more about the details of the settlement.
The Cheat Sheet: What is the national credit reporting agency settlement all about?
Beverly Harzog: The settlement calls for more accurate credit reporting, which is a huge plus for consumers. This settlement is the result of an investigation into consumer complaints about the inaccuracy of credit reports. The agencies are now required to do a better job of monitoring companies who report information to the bureaus. Consumers’ credit scores come from the credit reports and so errors can have a negative impact on a consumer’s ability to get good terms when applying for credit. It’s also possible for serious errors to prevent a consumer from getting approved for credit at all.
CS: What are some changes that will take place when it comes to the way complaints are handled?
BH: The settlement also took aim at the amount of “selling” that the agencies do when a consumer calls to make a complaint. The agencies can no longer use it as an opportunity to sell consumers products, such as credit monitoring services. This helps to protect consumers. When you’re already upset about your credit, you might feel vulnerable and purchase a product you don’t need. This decreases that probability quite a bit. The agencies can’t try to sell to you until the dispute is resolved.
CS: What key points should consumers know about the settlement?
BH: One of the most important things for consumers to know is that the major reporting bureaus have new rules about medical debt. Under the settlement, the agencies aren’t allowed to put medical debt on a credit report as soon as it’s reported to the agency. The agency must now wait 180 days after the account is reported before it can be placed on a credit report. This is a big deal for consumers because this gives them time to talk with their insurance companies about the debt. Often, people wait to pay medical bills because they assume their insurance hasn’t processed their part of the payment yet. As a result, their account might be sent to collections. Now, consumers have a safety net and this is terrific.
CS: Will there be any new provisions for identity theft victims?
BH: Agencies have to use an expedited process when the complaint is a “complicated dispute,” such as identity theft or fraud. In these cases, speed is extremely important to minimize the damage to a consumer’s credit. Basically, the settlement truly improves the chances of credit reports being more accurate. This is a big win for consumers.