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Managing Your Credit Report Just Got a Lot Easier

Timely payment of bills is a huge factor in our credit scores. Image: Pne, via Wikimedia Commons.

Clearly, many consumers have been unable to have errors fixed on their credit reports through the usual process. That's a big deal, since our credit scores are based on our credit reports, and those scores greatly influence the interest rates offered when we borrow money. An error or two on a credit report might cost you thousands of dollars if it is falsely depressing your credit score and resulting in a higher mortgage interest rate -- or, worse, resulting in your being denied credit.

The changes and you

So what has changed now? Well, the three big agencies have agreed to some reforms. Here are the main changes you can expect:

  • In the past, many requested corrections were not made because the credit agency took the lender's word (that a payment was late, for example) over the consumer's word. Now the agencies will investigate each complaint independently.
  • Medical debt, brought on by health setbacks rather than financial mismanagement, has often led to harmful black marks on credit records. Many times, in fact, a late payment by an insurance company, not the consumer, causes the problem in the first place. (More than half of collection reports on credit records are related to medical debt, and it's estimated that a fifth of consumers or more have had their credit score whacked by it.) The new agreement instituted a 180-day waiting period for medical debts to be added to credit reports, during which time insurers can pay up. Also, previous black marks that have been fixed, or are being fixed, will be struck from records instead of lingering for seven years, as they did before.
  • In the past, black marks could appear on your record from parking tickets and library late fees, among other things. This agreement will make it harder for that to happen. Credit agencies will exclude debts from your record that you didn't sign up for and agree to pay -- as you do when you borrow via a credit card or bank loan. A loophole remains, though: If such an unpaid fine ends up in the hands of a collection agency, it can still appear on your record.
  • While a 2003 victory for consumers resulted in the right to a free copy of the credit report each year from each of the agencies, along with a handy website ( AnnualCreditReport.com ) at which to request them, the new agreement permits follow-up free reports for those who have filed complaints so they can check to make sure errors have been fixed.

Fixing an error or two can make a big difference in your credit score. Image: TrinityCreditServices , Flick

We can expect changes in how the credit agencies operate to start happening within a few months, and to be fully implemented within a few years .

Dealing with credit records and ensuring their accuracy is rarely fun, but now it should be an easier, and fairer, process.

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The article Managing Your Credit Report Just Got a Lot Easier originally appeared on Fool.com.

Longtime Fool specialistSelena Maranjian,whom you canfollow on Twitter , has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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