Although credit requirements for obtaining a mortgage are quite lax now compared to a decade ago, there are still plenty of potential buyers struggling to raise their credit scores enough for a traditional low-interest mortgage. A recent statement from the CDIA, or Consumer Data Industry Association, which is responsible for representing all three credit bureaus, shows higher credit scores for millions of Americans coming soon.
What’s Changing on Your Credit Report?
The CDIA oversees and represents Experian, Equifax, and Transunion. These are the three credit bureaus responsible for gathering and processing information about your credit history, income, and overall creditworthiness. The group recently stated that all three bureaus were revising the standards via which information is collected and processed The result? Higher credit scores are coming to millions of people across the country, and there’s no action needed on their part.
Recent reports issued by the Consumer Financial Protection Bureau, or CFPB, noted an enforcement action against two of the three major credit bureaus – Equifax and Transunion. Consumers can view their credit scores for free once each year, but they must pay for their scores if they want to check them more often. Per the CFPB, the companies deceived many consumers with the value of the scores they purchased. As a result, the companies will pay a combined total of $17.6 million to consumers who purchased credit reports. They will also pay another $5.5 million in fines to the American government.
Because the credit bureaus are now under increased pressure to report credit information more accurately, they’ve adopted new processes for generating FICO scores. Many civil debts and tax liens, which can bring scores down tremendously, will be completely removed from the calculation. This means that about 12 million people across the country will see their credit scores climb some 40 points, and even more will see increases of roughly 20 points. This may be just enough of an edge to get more families into mortgages, which could potentially boost the housing market, which is still recovering from the slump.
Will Credit Requirements for Loans be Adjusted?
Although 12 million people will see a tremendous increase in their credit scores, it’s unlikely that mortgage brokers and other lenders will increase their credit requirements. Remember that these changes are coming as the result of improper reporting and unfairness in the credit reporting industry. It’s not a falsified or fraudulent credit score increase. This is great news for many consumers who are trying to buy homes, purchase cars, take out personal loans, rent homes, or even get certain jobs with less-than-perfect credit.
For now, things seem to be improving for many Americans with these new higher credit scores, especially if their credit is held back by civil lawsuits or tax liens. For things to continue to improve, the CFPB needs to retain its supervisory powers over the credit bureaus and continue to hold them accountable for accurate reporting.