Your Biggest Credit Report Complaint May Be Getting Fixed

Today the three major credit reporting agencies — Equifax, Experian and TransUnion — agreed to a settlement with the New York Attorney General’s office to overhaul the national credit reporting process to better serve Americans. The agreement includes changes to the credit report dispute process, how some negative information can appear on credit reports and oversight of the creditors that provide the information included on credit reports.

There’s a lot going on here, and the changes announced today will take time to implement (the agencies have three years to do so). A lot of details remain to be seen, but here’s what we know so far.

What to Expect

Changing the credit report dispute process would address one of the biggest consumer gripes with the credit reporting agencies — that it’s challenging to remove inaccurate, damaging information from credit reports.

Or, as New York Attorney General Eric Schneiderman said in his remarks to the press about the changes, “The credit reporting system in America that we’re addressing today suffers from inaccuracy and, oftentimes, outright injustice.”

The credit reporting agencies have agreed to employ specially trained personnel to review disputes and supporting documentation, in effect giving consumers the ability to challenge what is now an automated dispute process.

It’s perhaps the most noteworthy effort outlined in this agreement with the credit reporting agencies: About 10 million consumers have reported paying more for or not being able to access products like loans or insurance because of credit report inaccuracies, according to a 2013 report from the Federal Trade Commission. That’s about 5% of consumers with credit reports claiming adverse action because of report inaccuracies.

The agreement tackles another huge consumer credit issue: medical debt. It’s similar to credit report inaccuracies in that it can seriously damage a consumer’s credit and often appears on a credit report unexpectedly. Medical debt will no longer be reported until 180 days after it was incurred, allowing consumers more time to resolve the bill with their healthcare providers and insurance companies.

Another thing consumers might like to hear: Small fines may no longer have the ability to wreck your credit. Things like traffic tickets or government fines — “consumer debts that did not arise from a contract or other agreement by the consumer to pay,” according to the Consumer Data Industry Association, which represents the three major credit bureaus — will no longer appear on credit reports.

The Unanswered Questions

This agreement does not signify overnight change. The bureaus have three years to implement the new policies outlined in the agreement — it’s called the National Consumer Assistance Plan, by the way — and it’s important to keep in mind that Equifax, Experian and TransUnion are three separate companies. Changes may roll out at different times, and consumers should look to each bureau for information on how they’re taking action.

From a consumer credit standpoint, it’s unclear when the benefits of these changes will take shape. Though the promise of a better dispute process may be welcome news to anyone who has suffered from data reporting errors, mixed files or identity theft, it might be a while before they can benefit from the coming improvements.

“The timeframe is generally is 6 to 36 months. … A lot of it is front-loaded in 6 to 18 months,” said Norm Magnuson, of the Consumer Data Industry Association. “A lot of it, I think, is still being put together.”

There are a lot of unknowns about when and how these changes will take place, but if they’re carried out as planned, millions of consumers stand to benefit from them. Before and after this agreement takes effect, it’s important to carefully review the information in your credit reports and immediately address any errors you find in them, because as millions of Americans know all too well, those errors can be quite costly. Consumers can check their credit reports for free once a year from each of the three major credit reporting agencies, and can also get a free credit report summary updated every 14 days on Credit.com.