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Home-Ownership Could Increase Among Credit Shut-Outs
Maxine Waters, D- California, unveiled a proposal which would make extensive changes to the way consumer credit is scored and reported. Waters, a ranking member of the House Financial Services Committee, calls her proposal “Fair Credit Reporting Improvement Act of 2014”. With credit reporting agencies wielding more influence over Americans’ ability to gain access to affordable credit, Water’s legislation would address credit reporting agency errors and provide more transparency with the credit vetting and reporting process. The Federal Trade Commission (FTC) reports that about 40 million Americans have at least one error on their credit report and one-fourth of this number have significant errors which could potentially increase their cost of getting credit. This reform could help bolster the housing market by opening up more opportunity to those shut out by mortgage lending requirements.
See New Mortgage May Increase Home-Ownership Rate
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In a press release, Waters said, “Credit reports are no longer just used exclusively by lenders in making a credit decision. More and more, credit reports are used in a variety of ways, from employment decisions, to determining a consumer’s ability to rent a home, buy a car, or purchase insurance. A person’s credit report is too important in determining access to a wide array of opportunities for these reports to contain inaccurate and incomplete information.”
She added, “This proposal addresses many of the flaws with the existing consumer reporting system, by making common-sense changes that enhance consumers’ rights, create more transparency over the consumer reporting and credit scoring process, and increase the accountability of credit reporting agencies, furnishers, and companies that develop credit scoring models and formulas.”
This proposed legislation is part of the larger shift in mortgage finance reform which seeks to open the credit box wider for potential home-buyers. Earlier this year, VantageScore and FICO tweaked their algorithms to bypass all paid or settled accounts and remove medical debt from scoring consideration. Consumers with median credit scores who only have unpaid medical debts as their major negative credit, should see their FICO scores increase by 25 points.
Major points of the proposed consumer reporting system reform (Fair Credit Reporting Improvement Act of 2014):
Resources:
MReport. “Lawmaker Pushes to Reform Consumer Credit Reporting”
HousingWire. Waters proposes sweeping credit reporting reforms