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FDIC Consumer News

Spring 2015

Changes Could Help Boost Credit Scores

Your credit score, which is mainly based on your history of repaying loans, can determine your ability to borrow money and how much you will pay for it. Here is good news for some consumers: Your score may improve as a result of changes in how credit reports and scores are compiled.

In one development, FICO, a company that provides software used to produce many consumer credit scores, announced in August 2014 that unpaid medical debt will not have as big an impact on the new version of its most popular credit score.

And in December 2014, the Consumer Financial Protection Bureau (CFPB) announced that it will require the major consumer reporting agencies to provide regular accuracy reports to the Bureau on how disputes from consumers are being handled. The CFPB said medical debt in particular is a source of numerous complaints because the billing process can be complicated and confusing to consumers. The CFPB noted that the accuracy reports will help it hold credit reporting companies accountable for ensuring that erroneous information does not damage a consumer's credit score.

Separately, as part of an agreement in March 2015 with the New York Attorney General's Office, the nation's three major credit reporting agencies — Equifax, Experian, and TransUnion — are taking steps that could help some consumers raise their scores. For example, they committed to conduct a more thorough review of documents provided by a consumer who is disputing information in a credit report. Also, they are clarifying how consumers can appeal the decision that the credit reporting company makes. In addition, medical debts will not appear on credit reports until they are at least 180 days past due.

These changes may help raise some consumers' credit scores and reduce their borrowing costs. In general, though, to build or maintain a good credit score, consumers need to manage their money carefully, and that includes using caution when taking on additional debt.

Here are reminders from FDIC Consumer News about how to achieve and maintain good credit scores:

Be cautious with how much you borrow: Credit scores are generally higher for consumers who do not "max out" or otherwise use a large share of their available credit. Being careless about borrowing money can lead to debt overload. "Keep in mind that filing for bankruptcy harms your credit score and can remain on your credit report for 10 years," noted Elizabeth Khalil, a Senior Policy Analyst at the FDIC.

Always make your payments on time: "Whether it's your phone bill, utility bill, car loan or credit card, pay at least the minimum due, and pay it on time, because payments that are 30 days late may start lowering your credit score," said Heather St. Germain, an FDIC Senior Consumer Affairs Specialist. "Setting up automatic payments can help you make the due dates."

Check your credit report regularly: Erroneous or outdated information on your report or fraudulent information can hurt your credit score. "The Fair Credit Reporting Act gives you the right to dispute information on your credit report and have corrections made," St. Germain said. "However, many people don't check their credit reports. It's better to find errors and get them corrected, since your credit report is used for many decisions, such as when an employer is making hiring decisions or when you are applying to rent an apartment."

By law, consumers are entitled to receive a free credit report every 12 months. To request your free credit reports from each of the three major credit reporting agencies, go to or call toll-free 1-877-322-8228.

For more information, including tips for avoiding credit repair scams, see previous articles in FDIC Consumer News or search by topic at the CFPB's Web site. Also check back for future updates on significant changes in credit scoring.