The three major credit rating agencies reached an agreement with New York Attorney General Eric Schneiderman on Monday to change the way they handle errors on credit reports. Under the reforms, consumers can initiate a formal dispute to challenge inaccurate information and agencies must use trained employees to investigate the complaints.
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A mistake on your credit report can make it hard to get a loan or even a job, even though you didn't do anything wrong. Well, today, federal regulators announced a settlement with credit rating agencies, which aims to fix the problems with errors. There are also changes that will give people who accrue medical debt a little more breathing room. NPR's Chris Arnold reports.
CHRIS ARNOLD, BYLINE: These days, your credit score is your key to the financial kingdom. A bad score means you might have to pay a $100 more a month in car payments. Some landlords check credit scores, so it can make it hard to even rent an apartment, let alone buy a house. Meanwhile, getting a mistake off your credit report has become infamously difficult to do.
ERIC SCHNEIDERMAN: The credit reporting system suffers from inaccuracy and often from outright injustice. At least 10 million consumers have errors on their credit reports, through no fault of their own, that affect the cost of borrowing.
ARNOLD: That's New York Attorney General Eric Schneiderman, who has just struck a deal with Experian, Equifax and TransUnion.
SCHNEIDERMAN: The settlement agreement we're announcing today provides an extraordinary set of reforms.
ARNOLD: Right now, if you say there's a mistake on your credit report, regulators say the ratings firms usually just call up the debt collector or the credit card company and if they say it's accurate and that you owe them money it stays on your report, even if it's really a mistake. Now the credit agencies have agreed to do more investigative work themselves.
SCHNEIDERMAN: They have to do their own independent investigation and sign an employee with the discretion to resolve disputes to conduct an independent review.
ARNOLD: Also for medical debt, the credit rating firms will have to wait 180 days before adding medical debt information to your report. And once the debt's resolved they have to take it off your report soon after. Ira Rheingold heads up the National Association of Consumer Advocates.
IRA RHEINGOLD: It could potentially be extremely big news for consumers.
ARNOLD: But you may have noticed there were a couple of qualifiers - could potentially be a big deal. Rheingold says that's because there have been deals struck and laws passed before - some going back decades - with similar goals, but...
RHEINGOLD: The truth is the law has been pretty clear, and the credit bureaus have - in my opinion - been violating the law all of this time, which led to Attorney General Schneiderman's actions.
ARNOLD: The trade association for the credit reporting firms said in a statement that the firms were not found to be in violation of any law - that is often the case with such settlements. Financial industry firms don't admit any wrongdoing. Still Rheingold says state and federal regulators will have to enforce this settlement and existing laws if they expect to see any big changes. Chris Arnold, NPR News. Transcript provided by NPR, Copyright NPR.