1 Out Of 9 Credit Scores Increased Overnight

A 2017 study by the Consumer Financial Protection Bureau (CFPB) found significant problems with credit reporting at the three major credit bureaus (Equifax, Experian, and TransUnion). Among other things, the CFPB found evidence of information incorrectly assigned to the wrong person, failure to fully report results on dispute investigations to consumers, and poor oversight of third-party public records that entered into people's credit reports.

Public records oversight was already being addressed through a prior settlement between the credit bureaus and multiple state attorneys general. The bureaus created the National Consumer Assistance Plan (NCAP) as part of the settlement agreement, which includes directives for minimum standards for identification on data such as public records.

Since July of 2017, for public information to be included on a consumer's credit report, those records must have sufficient personally identifying information (PII). At a minimum, the PII must include the name, address, and Social Security number and/or birth date of the consumer. The information must be refreshed within ninety days to ensure that all information is accurate and up-to-date.

CFPB reports gave the credit reporting agencies further direction and served as a follow-up to monitor progress. Many records were corrected as planned during the first wave in July 2017, and the remainder of the information was corrected by April 16, 2018.

A CFPB follow-up report showed a clear difference among the types of public records being reviewed. Bankruptcies were "virtually unchanged" according to the CFPB – an expected outcome since the bankruptcy process inherently involves a significant amount of recordkeeping. In contrast, civil judgments "disappeared entirely" after the NCAP action.

Tax liens posed a greater challenge, as both federal and state tax liens are included in the reporting process. The original actions showed a relatively constant change in federal liens at 44% across all states, while removal of state liens from credit reports varied dramatically. Reporting differences on state liens ranged from a 90% drop in Maine to a less than 10% drop in Oklahoma. The April follow-up focused mostly on the remaining tax lien concerns.

According to LexisNexis Risk Solutions, approximately 11% of Americans with credit reports will have one of these negative events removed after the actions are complete – resulting in an immediate credit score increase of up to 30 points on the FICO reporting scale.

CFPB data from the July 2017 adjustments would suggest a lower increase – in general, consumers with changed records either tended to see changes around 15 points or experienced no changes at all.

Even if the jump in your credit score is not large, it could make a disproportionately large difference in your financial health. For example, if you are trying to buy a home in this extremely competitive market, a slightly better credit score could be the factor that nudges you past competing bids. The savings on a mortgage could be enormous.

What if you never had a tax lien or lost a civil judgment? It's a good idea to check your credit score (and your full credit report) anyway. A regular check can help you spot fresh errors – or even signs of identity theft and fraud – and allow you to limit the damage. Vigilance is important when it comes to your credit, as it is in most aspects of life.