The three major credit reporting agencies—Equifax, Experian, and TransUnion—are removing debts that didn't arise from a contract or agreement by the consumer to pay—like old gym memberships, library fines, or traffic tickets—from consumers' credit files. As a result, your credit score could go up.
Consumers who had at least one collections account deleted from their credit files had an average jump of 11 points in their credit scores, according to a study by the New York Federal Reserve.
But there's considerable variation how much your credit score could potentially change. Some people will see a 40 or more point increase, while the majority of consumers will get more along the lines of a 20 point jump. (Learn how the credit reporting agencies calculate credit scores.)
Around 8 million Americans will see a change in their credit scores.
The change in how the agencies treat non-loan debts is part of the National Consumer Assistance Plan (NCAP), which is a result of talks and an agreement between the major credit reporting agencies and 31 state attorneys general. The NCAP is an initiative to ensure credit reports are accurate and make it easier for consumers to correct any errors on their reports.
Previously, the credit reporting agencies announced that they would remove tax liens and civil judgments from credit reports, but only under certain circumstances. Subsequently, the agencies decided to remove all tax liens and civil judgments from consumers' credit reports. (To learn more, read this announcement from TransUnion.)
Even if you don't think your credit reports and credit scores will be affected by these changes in how the agencies handle non-loan debts, tax liens, and civil judgments, you should regularly check your credit reports from all three agencies to ensure the information is accurate. (Learn how to correct incomplete and inaccurate data in your credit report.)
Effective date: August 15, 2018