What Is Happening on July 1st Could Reshape Your Credit Reports?

You may have never heard of the National Consumer Assistance Plan (NCAP), but for millions of American consumers the NCAP could change their credit reports for the better this summer. In fact, an estimated 12 million people could see a potential boost in their credit scores by July 1, 2017.

What Is the National Consumer Assistance Plan (NCAP)?

A few years ago the 3 major credit reporting agencies (CRAs) -Equifax, TransUnion, and Experian – entered into a settlement with 32 state attorneys general. According to some reports the multi-state investigation into the CRAs initially began as a result of repeated consumer complaints about the difficulty of correcting credit reporting errors. While the CRAs did not actually admit to any wrongdoing during the investigation, they did agree to make many sweeping procedural changes as a condition of the settlement, changes which would normally require an act of Congress and an amendment to the Fair Credit Reporting Act.

In addition to the CRAs paying some fines to the states, the National Consumer Assistance Plan (NCAP) was born as a result of the aforementioned settlement. The NCAP was announced by the Consumer Data Industry Association (CDIA), the trade association representing Equifax, TransUnion, and Experian, shortly after the settlement. According to the CDIA the NCAP was launched to “enhance the accuracy of credit reports and make the process of dealing with credit information easier and more transparent for consumers.”

Why 12 Million Consumers Could See Higher Credit Scores After July 1st

One of the terms the CRAs agreed to under NCAP was the implementation of new, enhanced public record data standards. More specifically the CRAs agreed to only include tax liens and judgments on a consumer’s credit report if that data meets the following guidelines:
The public record includes the consumer’s name, address, and either the social security number or date of birth
The public record is verified to still be accurate (via courthouse visits) at least once every 90 days
Apparently most of the judgments and about half of the tax liens currently appearing on credit reports do not meet these new data standards implemented under NCAP. As a result, the CRAs have announced that they will be purging (aka removing) the “vast majority” of civil judgment data and “approximately half” of the tax lien data from consumer credit reports on or about July 1, 2017.

The Change May Not Be Permanent

Lenders are understandably nervous about the removal of so much potentially accurate public record data from consumer credit reports. The removal of this data could immediately boost the credit scores of up to 12 million consumers. This makes a lenders’ job of effectively predicting risk more difficult.

Of course, lenders can still check public record data on their own, and many of them do, so the removal of a tax lien or judgment from a credit report does not mean that the consumer is off the hook from a lending perspective either. In other words, a lender still might require you to pay off an outstanding public record, even if it is not on your credit reports, before approving your loan application.

Additionally, while the CRAs have not officially announced any plans to add back the soon-to-be-removed public record data, there is a chance that they could be hard at work behind the scenes to find a method of bringing said public record data up to current NCAP standards. This is conjecture, of course, but it makes sense. If a CRA finds an effective way to locate missing public record information (i.e. name, address, and social security number or date of birth) and to routinely verify that information at the courthouse then a CRA could potentially add those previously removed liens and judgments back onto credit reports in the future. The Fair Credit Reporting Act has not changed, so there is nothing illegal about including a lien or judgment on a credit report as long as the FCRA limitations on credit reporting are being followed.