Recently consumers with a less than perfect credit history received some very good news from the Fair Isaac Corporation, the nation’s most widely used credit rating agency. In short, the agency has decided that failure to pay a past debt will no longer reflect negatively on consumers credit scores provided that the bill has been paid in full or settled through a collection agency.
Now, a new bill in Congress promises to help consumers even further by reducing the time period that bankruptcies and defaulted loans will be included in credit reports. This would include certain foreclosures and short sales and that could mean thousands of new home buyers on the market that otherwise would not be eligible to obtain a mortgage loan.
The bill is entitled The Fair Credit Reporting Improvement Act of 2014. If passed, judgments, collection efforts and paid tax liens would remain on one’s credit report for only 4 years instead of the current 7 year period and bankruptcies would be removed after 7 years instead of 10. Short Sales and foreclosures would be removed completely provided that the loan was originally approved as a result of some type of deceptive or illegal lending practice.
The passing of this new bill would mean a huge influx of newly qualified buyers into the marketplace and that would certainly include persons eager to buy their own home that were not able to do so in the past due to their credit score. This being said, not everyone agrees with the new bill. Many lenders disagree with these changes and state that by limiting the amount of credit history available to them there will be a big increase in the number of defaulted loans in the future. They basically feel that these changes would unfairly improve the credit score of applicants and make them appear to more credit worthy than their past would otherwise indicate.
Regardless of your personal opinion, it is fair to say that if The Fair Credit Reporting Improvement Act of 2014 is passed by congress that the real estate industry can expect an influx of new buyers that would otherwise not have been seen for years to come.