Millions of Credit Scores Set to Increase in July

A new and significant change in credit scoring could increase the scores of millions of Americans in 2017.Effective July 1^st, 2017, the top three credit agencies – Equifax, Experian, and TransUnion – will be removing certain types of negative information, such as civil judgments and tax liens, from citizens’ credit reports. FICO estimates that of the roughly-200 million Americans who have credit scores, about 12 million could see their scores increase in July, and about 11 million of these will be increases of 20 points or less.“It’s good news for the consumer, clearly, because the credit score is used almost ubiquitously across the world of consumer finance, and lenders use it, insurance companies use it, credit carders use it,” says credit specialist John Ulzheimer, who has worked for both FICO and Equifax.One major reason for removing tax liens and civil judgments is that attorneys general across the country have argued that they are too often attached to the wrong clients and unfairly hurt their abilities to access credit for homes and cars.The new standards, according to the Consumer Data Industry Association (which represents the top three credit agencies), “carefully balance the concerns of consumers and regulators about public record accuracy while at the same time ensuring that creditors can continue to rely on credit report data.”However, lenders must also face a new challenge of balancing the consumer’s need for credit with the bank’s need to accurately assess consumers’ likelihood of paying loans back. “This has lenders concerned because now they are going to be essentially fooled into thinking that this consumer or applicant is going to be a better credit risk than they really are,” said Ulzheimer.