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6 percent of FICO scores to change under new credit rules

Summary

The credit bureaus will remove all civil judgment and most tax lien data from credit files starting July 1

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NCAP credit reporting changes

About 6 percent of consumers with credit scores will see them change under new credit reporting standards taking effect July 1, 2017, according to FICO.

The three major credit bureaus – Equifax, Experian and TransUnion – will remove all civil judgment data and many tax lien records from credit files under their jointly developed National Consumer Assistance Plan. The bureaus launched the plan after a 2015 settlement with 31 state attorneys general mandated that they improve credit reporting accuracy and provide consumers with more transparency.

Most of the consumers whose scores will change will see an improvement of less than 20 points, FICO said in a recent report. A smaller group (1 percent or less) will see credit score gains of between 20 to 39 points. FICO’s data show very few will gain more than 40 credit score points or lose any points.

FICO also said in its report many of the credit files that will be impacted already contain other derogatory information. Those consumers will likely have low credit scores even after civil judgment and tax lien records are removed.

The vast majority of FICO-scoreable consumers (about 94 percent) will see no change. That could ease the concerns of lenders, some of whom feared the new rules could artificially raise some consumers’ credit scores.

“In the grand scheme of things, not too many people are going to get different answers from before,” said Sally Taylor-Shoff, FICO’s vice president of scores. “When we presented the results to lenders, most of them felt very comfortable. It’s not like they really need to change what they’re doing.”

Additional changes will take effect in September. Collection agencies and debt buyers will no longer be able to report medical debts until they’re 180 days old. Also, furnishers of authorized user data must include those individuals’ full dates of birth on all accounts to which they are added. Most major card issuers require an authorized user’s date of birth, Chase being a notable exception. However, a Chase representative said in an email the company will comply with the new rules.

KEY DATES OF THE CREDIT BUREAUS’
NATIONAL CONSUMER ASSISTANCE PLAN
Who is impactedWhat is requiredEffective date
Collection agencies and debt buyersReport original creditor name and classification code.June 15, 2016
Collection agencies and debt buyersNo reporting of debts that didn’t arise from a contract or agreement to pay (i.e. traffic tickets, court fines).June 15, 2016
Collection agencies and debt buyersReport a full file monthly.Sept. 1, 2016
Credit bureausBureaus will exclude public tax lien and civil judgment data that do not conform to new data standards.July 1, 2017
Collection agencies and debt buyersReport a delete for accounts that are being paid or were paid in full through insurance.Sept. 15, 2017
All data furnishersReport full name, address, Social Security number and date of birth.Sept. 15, 2017
Reporters of authorized user dataReport full date of birth for new authorized users on all accounts.Sept. 15, 2017

See related: Will removal of civil judgments boost my credit score?, How tax liens affect your credit score

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