Consumers stand to benefit from a recent settlement that will require the nation's largest credit agencies to make it easier to fix faulty credit reports. The settlement also impacts the way medical debts are recorded. These long overdue developments could positively impact the lives of millions of consumers who struggle under the weight of inaccurate credit reports and face an almost Sisyphean task of trying to fix them.
New York state Attorney General Eric Schneiderman announced earlier this month that his office reached an agreement with credit bureaus Experian, Equifax and Transunion to improve the accuracy of credit reports. Under the terms of the deal, the companies will rely on specially trained employees who will work through credit reporting problems with consumers. In some cases, companies had been using an entirely automated dispute resolution process.
The agreement also targets medical debts, which make up more than half of all collection items on credit reports. The credit reporting agencies will create a 180-day waiting period before recording medical debts, a nod to the length of time it can take insurers and medical billers to work out coverage issues. This is a prudent solution that should help consumers, many of whom are unknowningly penalized on their credit reports while they are actively involved in payment disputes with their insurers.
The settlement stems from a 2012 investigation in which several New Yorkers complained about the difficulty of correcting errors in credit reports. Although each of the major credit bureaus has denied any wrongdoing, they have made reasonable efforts to work with investigators to revamp the way the industry handles errors. The agencies have three years to make the changes, though most should be in place within six to 18 months.
Credit reports matter. The data constitute a kind of fiscal report card that influences credit scores and affects consumers' ability to secure everything from home loans to cellphone contracts and, increasingly, jobs. With cases of fraud and identity theft on the rise, consumers of all economic backgrounds would be wise to keep close tabs on their credit reports, which by federal law can be retrieved for free once a year at annualcreditreport.com.
Although it took arm-twisting by New York's attorney general, the credit bureaus did the right thing by finally agreeing to take responsible, commonsense steps to fix a long-standing problem. If executed as designed, the changes should better equip consumers to take control of their credit.