California law could change way credit scores are calculated, affect job seekers
When your ability to get a job, finance a home or maintain a low credit card interest rate is dependent on having a stellar credit score, any negative event on your report — even as minor as missing a payment on a student loan or having a medical bill go into collections — can be problematic. But if a California lawmaker has anything to say about it, negative credit events would remain on a credit report for less time, and cause less potential damage to your score. Representative Maxine Waters, of the California House Financial Services Committee, has introduced a new bill that would alter the Fair Credit Reporting Act in several significant ways, which could help job seekers, as well as the general public. “The Fair Credit Reporting Act was passed in 1970, before credit scoring was pervasive as it is today,” said Gerri Detweiler, the director of consumer education for credit.com. “It probably is time to look at the seven-year reporting period.” Under the proposed changes, negative credit information — such as filing for bankruptcy or defaulting on a loan — would only remain on a person’s credit report for four years, instead of the current seven years. After the four years had passed, the negative event would be wiped from the record. In addition, for those with hefty student loan debt, if a person defaulted on their loans, they could undo the damage by paying on time for nine straight payments. Those with medical debt would see their debts removed from their credit reports if the balances were reduced. Several credit reporting agencies have expressed opposition to the new legislation, with experts claiming the bill would put an “unreasonable” burden on financial providers and would drive up interest rates for everyone. “If [banks] are less able to accurately predict risk, they will proactively increase the cost of loans across the board,” said Amber Stubbs, cardratings.com’s managing editor. It is unlikely, once the bill goes through the legislative process, that it will look the same as it does in its initial iteration; it may not even pass, with or without amendments. But it would be interesting to see how a more consumer-geared credit-reporting system could affect job seekers that have stumbled on hard times, and employers that are always looking for top talent.]]>
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