Results are Uncertain for Credit Report Clean-Up

August 7th, 2017 by Bunch & Brock

Consumers with liens or civil judgments without proper identifying records got some relief July 1, when the three major credit bureaus — TransUnion, Experian and Equifax – purged their records of that information if it was incompletely filed or had not been updated in the last 90 days. Newer material that doesn’t meet the updated criteria for information will not be added to the report. What this means is that for those with bad marks on their credit scores, their scores may move higher.

Everything not Removed

This move from the reporting agencies does not represent a clean slate for everyone, as the bureaus report that 92 percent of the people who have items removed from their reports have other poor marks that will stay on, and only about 1 million of the 200 million with credit reports have clean records with the exception of the removed data. Overall, the purge is expected to affect six to seven percent of people with credit scores.

The action is expected to take several weeks, and both those who support it and those who don’t have predictions about the outcomes.

Voluntary

The credit bureaus, who are under no legal requirement to remove this information but instead have chosen to do so for other reasons, suggest that, overall, the impact on the economy will be minimal. They say that scores, if they move, may only do so slightly, and that the following reports will be more accurate. A story run in several newspapers from news agency The Associated Press (AP) reports that even with the material removed, the average score will go up by about 10 points – a primarily cosmetic change to scores.

While the action will lessen complaints based on inaccurate or false information and work to help keep records clean and clear, most sources think this will not have any major effect on lenders’ ability to assess who is and who is not at risk for credit or loans.

Risks too High

Opponents of the decision, however, fear that exactly the opposite will happen. The AP story, written by columnist and financial planner Liz Weston, quotes a representative of LexisNexis Risk Solutions as stating this might not only be a bad decision, but wind up being “catastrophic.”

The reasoning behind their reticence to support the issue is based on studies showing that individuals who have judgments and tax liens on their credit reports are five times more likely to default on their loans than those who don’t. By removing those records, and with an increase in credit scores, some are is afraid potentially high-risk individuals may be able to slip past the safeguards and acquire loans which they cannot pay back.

Results Not In

It’s still too early to know exactly what result this will have on consumers and lenders, and ultimately on the economy overall. It is a safe bet, though, that the results will be neither stupendous nor catastrophic. While this will offer some relief to consumers, and may cause lenders to be slightly more cautious, more than anything it will tighten standards, and hopefully make these processes more efficient.

The attorneys at Bunch and Brock have been serving our community and the entire state of Kentucky for more than 35 years with their legal needs. Working out of our Lexington offices, we don’t just serve the community – we are members of it, and we look forward to helping our neighbors when they need us. If you have legal questions or would like to set up an appointment contact us online or call us at 859.254.5522