If you’re one of the 25% of Americans with an error on your credit report, you may be in for an unpleasant surprise the next time you apply for a loan. Fighting to get an error fixed on your report can be a tedious and time-consuming process. The good news? That battle may get a little bit easier.
The country’s three biggest credit-report collectors — Equifax, Experian and TransUnion — have recently announced plans to change the way they handle credit score errors for more than 200 million Americans. In an agreement dubbed the “National Consumer Assistance Plan,” the credit giants have promised to be better about resolving disputes over information in your credit reports.
After almost a decade of the same old status quo in the credit industry (this is the biggest credit reform since 2003!*), here are three reasons why this overhaul is a really big deal for you and your small business.
In 2012, the Consumer Financial Protection Bureau found that credit agencies only resolved an average of 15 percent of consumer disputes internally. But that’s about to change! As part of the new agreement, credit firms will assign specially trained employees to review the documentation you submit when you believe there is an error in your files. These employees have to look into your case and reach some resolution, even if your creditor says their information is correct. Win! For more information about how to dispute a mistake on your report, check out Nerdwallet.
If you’re one of 43 million Americans with unpaid medical bills on your record, you might get a credit treatment makeover soon. Under the new agreement, credit-reporting firms have to wait 180 days before adding any medical-debt information to your credit report – which is a huge help if your insurance company simply delayed your payments, or mailed your claim denial to your old address. There’s a big difference between deferring payments, late payments, and not paying at all! Credit tip: Take advantage of that six-month grace period to clear up other discrepancies on your report and catch up with other unpaid bills to make sure you’re in the best shape possible before applying for a loan.
When we review your small business loan application, we look at a number of factors to understand your creditworthiness – including your personal credit score. So what are you waiting for? Take advantage of the new simplified dispute process to make sure your credit score is accurate. Correcting errors could save you money in the long run by earning you more competitive rates on your small business loan. Believe it or not, getting a small business loan could even help improve your FICO score over time, as long as you manage your payments responsibly. The longer your history of well-managed debt, the better it is for your score and chances of securing affordable loans in the future.
Don’t forget: you’re entitled by law to one free credit report per bureau each year! Knowledge is power, and the more you know now, the less interest you might pay on your small business loan later.
Confident in your credit score? Apply for a loan with Funding Circle to help you take your small business to the next level!
*The last sweeping reform of the credit-reporting industry occurred in 2003, when the Fair and Accurate Credit Transactions Act addressed how credit-reporting firms would treat disputes related to fraud/identity theft, and required giving consumers access to free credit reports from all three firms once every 12 months.