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Revamping Credit Scoring: Proposed Changes You Need To Know About

Credit Reporting and Proposed Changes: What You Need to Know

Your credit score is a crucial factor in determining your financial health. It affects everything from your ability to obtain loans and credit cards to the interest rates you receive on those loans and credit cards.

Credit reporting agencies, such as Experian, Equifax, and TransUnion, play a vital role in measuring your creditworthiness and credit score. However, proposed changes to the credit reporting system in the United States could drastically alter how credit scores are calculated and reported.

In this article, we will explore the different components of credit scores, proposed changes to the credit reporting system, and the pros and cons of those changes.

Credit Reporting Agencies

Experian, Equifax, and TransUnion are the three primary credit reporting agencies in the United States. They collect, store, and maintain information on millions of individuals and businesses.

This information is used to calculate credit scores, which reflect a borrower’s creditworthiness. Each credit reporting agency uses a different method to calculate credit scores, but the most common method is called the FICO score.

It considers several factors, including payment history, amounts owed, length of credit history, new credit, and credit mix. Payment history and amounts owed are given the most weight as they reflect the borrower’s ability to repay their debts on time.

Components of Credit Score

Payment History: Payment history is the most crucial factor in calculating credit scores. It refers to whether or not you have made payments on time in the past.

Late payments, missed payments, and defaults can negatively impact your credit score. Amounts Owed: The amount of debt you currently owe affects your credit score.

Carrying a high balance on your credit cards could indicate to lenders that you are a high-risk borrower. Length of Credit History: The length of time you have been using credit is also a contributing factor to your credit score.

Longevity in your credit history indicates stability and a responsible borrowing pattern. New Credit: Opening new credit accounts frequently in a short period may lead lenders to assume you’re a high-risk borrower.

It could indicate you are facing financial difficulty. Credit Mix: A mix of credit accounts such as installment loans, revolving credit (credit cards), and mortgages boosts your credit score.

It shows you can manage different types of debts.

Proposed Changes to Credit Reporting

In recent years, consumer advocates and lawmakers have raised concerns about the credit reporting process. The proposed changes aim to make the process more consumer-friendly and fair.

Government Agency: One proposal is to create a government agency that oversees credit reporting companies to ensure fair and accurate reporting of credit scores. The goal is to promote transparency and alleviate bias.

Rent and Utility Payments: Currently, rent and utility payments are not considered when calculating credit scores, which can be detrimental to those who do not have much experience with credit or do not have credit cards. The proposed change would allow credit reporting agencies to include this information, which could help people establish credit or improve their credit scores.

Prohibition of Other Uses: Credit scores are frequently used for purposes other than determining creditworthiness. Proposals suggest implementing more regulations to restrict the use of credit scores for employment, housing, and insurance.

Reduction of Negative Information: Credit reporting agencies would be required to remove negative information, like late or missed payments, if they are corrected within a reasonable amount of time. Currently, late payments can stay on a credit report for up to seven years.

Elimination of COVID-19 Derogatory Information: Due to the COVID-19 pandemic, many people have struggled financially. Delinquent accounts, including missed rent, mortgage, and credit card payments, can result in negative marks on a credit report.

Advocates suggest removing these derogatory marks to protect individuals impacted by the pandemic. Limiting Medical Debt: Another proposal calls for medical debt to be treated like any other type of debt and given less weight when calculating credit scores.

The reasoning behind this is that many Americans accrue medical debt outside of their control.

Pros of Proposed Changes

Consumer Protection: All of the proposed changes aim to protect consumers from unfair and inaccurate credit reporting. If implemented, they could lead to more accurate and fair credit scores that reflect an individual’s creditworthiness accurately.

Reduction of Negative Information: The reduction of negative information and the elimination of COVID-19 derogatory information could help people rebuild their credit scores more quickly following financial hardship. This will enable them to access loans, mortgages, and credit cards who they might have been denied previously.

Elimination of Certain Debts: The elimination of medical debt may benefit individuals who would have been denied credit for issues outside of their control. Reduction of Credit Reporting Errors: Allowing consumers to view their credit reports online with accurate, understandable statements can reduce credit reporting errors, which can negatively impact their credit scores.

Cons of Proposed Changes

Government Inefficiency: Creating new government bodies to oversee the credit reporting system may lead to more bureaucracy and inefficiency, which could make the process even more complicated for consumers. Easy Penalty Reduction: Proposals to reduce negative information could make it easier to escape the penalties of non-payment or mismanagement of credit, leading to less responsibility towards personal finance principles.


Overall, proposed changes to the credit reporting system in the United States aim to make the process more transparent, accurate, and fair for consumers. While there may be some concerns about the implementation of these changes, they ultimately reflect a move towards protecting individuals and promoting a more dependable financial industry.

By following these discussions about credit scores, you better understand the actions you can take to improve and maintain your creditworthiness, as well as advocacy’s potential effects on applicants to our country’s primary financial program.

Potential Changes to Credit-Scoring Models

Your credit score is an essential element of your financial well-being. It reflects your creditworthiness, which determines your eligibility for loans, credit cards, and other financial products.

However, inaccuracies in the credit-scoring process have led to concerns about the fairness and accuracy of credit scores. In response, lawmakers have proposed several changes to the way credit scores are calculated and reported.

In this article, we’ll take a closer look at two proposed pieces of legislation and examine their potential impact on the credit-scoring system.

Comprehensive CREDIT Act

The Comprehensive Credit Reporting Enhancement, Disclosure, Innovation, and Transparency (CREDIT) Act is a piece of legislation introduced in the House of Representatives in 2019. The bill aims to improve the credit reporting system and make it more equitable for consumers.

One of the most important aspects of the bill is that it would require credit reporting agencies to provide consumers with more extensive access to their credit reports. This would include free access to credit scores and credit reports at least once a year and after any significant change to their credit reports.

Additionally, the CREDIT Act would require credit reporting agencies to have more accurate and timely information. The bill would require the companies that furnish information to credit reporting agencies to follow new rules about providing accurate information promptly.

Furthermore, the bill mandates that credit reporting agencies must investigate any disputes filed by consumers within 30 days. There is also a provision that places limits on the length of time negative items can remain on a credit report, reducing it from seven years to four years for all unpaid debt with the exception of bankruptcies, tax liens, and civil judgments.

Protecting Your Credit Score Act of 2021


Protecting Your Credit Score Act of 2021 is another proposed piece of legislation aimed at reforming the credit-scoring system. The goal of this act is to help consumers better understand and protect their credit scores by improving the accuracy and completeness of credit reports.

The act requires any credit reporting agency that determines a credit score using a proprietary algorithm to provide consumers with a free copy of that algorithm at the consumer’s request. This copy will allow consumers to understand how credit reporting agencies arrived at their credit score, which can be helpful in improving their financial behavior.

Furthermore, the act would enforce more rigorous credit reporting standards, removing negative items from a credit report, including debts established through fraudulent activity. Additionally, it requires that credit reports include information about on-time rent and utility payments, which can help people with limited credit histories build credit.

Impact of Potential Changes

The potential changes discussed in the

Comprehensive CREDIT Act and the

Protecting Your Credit Score Act of 2021, if enacted, would have a significant impact on the credit-scoring system. Improved Access to Credit Reports: The CREDIT Act’s provisions on improved access to credit reports would allow individuals to monitor their credit reports more frequently and quickly detect any inaccuracies or fraudulent activity.

More Accurate and Timely Information: The CREDIT Act’s rules about furnishing information would require companies to provide more accurate information about consumers, reducing errors and inaccuracies that can impact credit scores. Shorter Negative Reporting Time: Shortening the time negative items remain on a credit report would give consumers the opportunity to recover from financial difficulties more quickly, improving their credit scores.

Understanding of Credit Score Calculations: The Protecting Your Credit Score Act’s provisions on understanding credit score algorithms would create transparency in the credit scoring system, helping consumers understand how credit reporting agencies arrive at their scores. Improving Credit History: The inclusion of rent and utility payments in credit reports would help individuals with limited credit histories build credit and obtain loans.

This change can have a significant positive impact on the credit scores of millions of people.


Overall, the potential changes to credit-scoring models presented in the

Comprehensive CREDIT Act and

Protecting Your Credit Score Act of 2021 reflect a move towards greater transparency, accuracy, and fairness in the credit-scoring system. If enacted, these changes could help more consumers access credit and obtain loans by providing a more accurate representation of their creditworthiness.

By following and advocating for potential changes to credit scoring models, you can better control your financial future and protect your credit score. In summary, changes to the credit-scoring system are underway, with proposed legislation such as the

Comprehensive CREDIT Act and the

Protecting Your Credit Score Act of 2021 aiming to improve the accuracy, fairness, and transparency of the credit reporting process.

These potential changes emphasize the importance of maintaining accurate credit scores, accessing credit reports regularly, and understanding how credit score calculations are made. They provide consumers with valuable access to more information, shorter negative reporting periods, and a deeper understanding of credit score algorithms to help them better control their financial futures.

By staying informed and engaged in advocating for credit score reform, individuals can protect and improve their credit scores, ultimately leading to greater financial stability and opportunity.

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