Changes in credit scores and reporting
Have you checked your credit report lately?
Have you checked your credit report lately? Credit scores play an important role in your life, so it is important to periodically check your credit report, especially if you plan on applying for credit. Credit reports tell your credit history, so it is especially important to ensure that the report is accurate. Everyone is entitled to a free report from each bureau – Trans Union, Experian and Equifax – once every 12 months from AnnualCreditReport.com; the only source authorized by the Federal Trade Commission (FTC) to pull your credit report. Not only is a good score essential for obvious financial events like qualifying for a loan or getting a credit card, but also for the less obvious like obtaining cell phone service, renting a car, or perhaps even getting a job. Two new changes to credit scoring recently occurred and could benefit consumers who do not currently have enough history to generate a FICO score.
The first change allows FICO to use alternative data such as property records, cell phone and utility bills from LexisNexis and Equifax to generate FICO scores. According to FICO, approximately 15 million consumers of the 53 million “unscorable” people in the U.S. will be issued a score based on this new alternative data. It is important to note that if you already have a score from FICO, you will not get a new score; this alternative data is intended only to score those who do not have credit scores or credit reports. If you have not had a score in the past and have one of these bills in your name, you should be able to check back and see if you have a score later this year.
The second change is the ability for consumers to access credit scores through some nonprofit agencies. Previously, if you visited a non-profit counselor and they purchased a credit score and report on your behalf, they were prohibited from sharing that information with you. FICO has reached new agreements to allow nonprofits to share scores and reports bought on behalf of consumers. It is important to note that some agencies may have agreements in place with their credit reporting service that may still prohibit them from sharing credit scores and reports to consumers.
These two new announcements are very encouraging for consumers. Michigan State University Extension has a variety of resources on credit and offers workshops throughout the year to help you become financially healthy. Additionally, you can take the Financial Health Survey at MI Money Health to access if you are financially healthy and discover more ways you can improve your financial health.