If you are thinking of buying a home, then one of the most important pieces of information to know is your credit score. A better score will allow you to qualify for a larger loan, as well as grant you access to better interest rates. The result is that a credit score increase could end up saving you thousands of dollars in interest payments over the course of your mortgage, regardless of if it is a new loan or an old one being refinanced! Thankfully, millions of American consumers have seen significant bumps in their score over the course of the last year as the major credit reporting agencies introduced new regulations in how they calculate credit scores. Keep reading to learn why you might want to double-check your score if you haven't done so in a while!
The changes to credit score reporting started last July, when Experian, Equifax, and TransUnion removed nearly all civil judgment data (unpaid money from a civil lawsuit) and about half of tax lien data (unpaid taxes) from consumers' credit reports. Then, in April of this year, the major credit reporting bureaus took this a step further by removing the remaining tax lien data from credit reports. These deletions affected an estimated 20 million consumers, with some experiencing a boost of over 30 points to their credit score!
The newest round of score changes deals with the reporting of collection events, such as unpaid gym memberships, library fines, traffic tickets, and some medical debt. Over the course of the last year, credit bureaus have been purging millions of these records from credit reports. Previously, approximately 33 million Americans had at least one collection event in their credit report, whereas that number has now dropped to 25 million. The average score increase for those 8 million people was a mild 11 points, although 18% experienced a gain of at least 30 points!
Of course, the credit bureaus aren't improving consumers' credit scores out of the goodness of their hearts; rather, the changes are happening due to a 2015 legal settlement with several state attorneys general, which created the National Consumer Assistance Plan. This plan placed significant restrictions on what information can appear on a credit report in an attempt to improve their accuracy and fairness to consumers.
