2017 Credit Reporting Changes and How These Changes May Be Impacting Your Lending Decisions
This year will be a year remembered for many reasons, but within the credit reporting industry, 2017 will be a year remembered for significant changes in the reporting of certain types of information to credit reports. The National Consumer Assistance Plan (NCAP) was established by the 3 National Credit Repositories as a collaborative initiative to help collect and deliver accurate consumer information, to provide consumers more transparency when interacting with consumer reporting agencies about their credit reports. The plan was announced after cooperative discussions and an agreement with the Attorneys General of multiple states.
In July, NCAP delivered significant changes to the reporting of certain types of Public Record Data. NCAP now requires that in order for a Public Record to be reported to a consumer credit report, it must meet the following minimum reporting standards:
- Minimum consumer information (PII): Name, address, social security number and/or date of birth
- Minimum frequency of courthouse visits to obtain newly filed and updated public records is now required at least every 90 days
With these new standards now in place, it has been determined that Bankruptcy information was not impacted, and therefore continues to be reported to all three credit bureaus. However, almost all (approximately 96%) judgments have been removed from credit reports and will not be reported, as they do not meet the NCAP minimum standards. Likewise about 50% of tax liens have been removed, and will not be reported for the same reason.
Updates to NCAP
While these well intended changes have taken place nationally without much fanfare by the consumer credit reporting industry, we feel it necessary to remind all credit report users that judgments and liens have been removed from the file. It is imperative that you think about the this loss of visibility on such critical components of a consumer’s credit history and how the lack of such visibility is impacting your risk mitigation and loan approval process. Some studies have been conducted by several industry experts that suggest these changes impact about 9% of the US population, and that credit scores have only increased slightly within this group of consumers since the removal of tax liens and judgments. Yet some lenders have conducted their own analysis, finding that the percentage of applications containing either liens or judgments to be much higher. Approving these applications without conditioning for pay off leaves them exposed with risk they are not comfortable with. How do you feel about this? If you are selling consumer loans, you are seeing some public record items with title information on the subject property, not necessarily on the applicant. Are you getting this information too late in the application process?
We at Strategic Information Resources want to be certain you are given every opportunity to have all the risk assessment resources available so you are making the best decisions. There is a way we can help, by providing you with a short review of your applicant’s credit history and our Public Record Report to obtain your own numbers on what you might be missing today in liens and judgment information. We highly recommend using our Public Record Report that offers an efficient supplement to this year’s loss of data. The data on our Public Record Report goes through a validation process to reduce false positives and delivers real time information early in the application process to address issues upfront, before the appraisal and other processing items are ordered. We highly encourage users of consumer credit to consider the use of a supplemental Public Record Report to ensure you are not missing critical information in your assessment of risk.
In addition to the July changes in Public Record Reporting, changes also took place in September on the reporting of medical debt on consumer credit files. First, medical debt collection accounts are no longer allowed to be reported until they are at least 180 days past the date of the first delinquency with the original creditor (provider). This timeline in the delay of reporting such information allows for insurance or other payments to be made before hitting the credit file as a collection account. Additionally, debts that have been paid by insurance must now be deleted from the consumer credit file and not be reported as a paid collection account as they have been in the past. There may be additional reporting changes in the future as the three credit repositories continue collaborating through NCAP on their mission to ensure data accuracy and transparency for consumers in interacting with the credit reporting industry.