Legislation to reform how credit scores are created has received bipartisan support.
Senator Kamala Harris wants to add more data to how credit bureaus calculate credit scores as part of a broader plan to address the black homeownership gap in the U.S.
There are an estimated 26 million people who are “credit invisible” and another 19 million who are said to have “unscorable” files, according to the Consumer Financial Protection Bureau. These people don’t have enough bank or credit-union accounts to have a credit score by today’s standards. “Today, we have a voluntary system of furnishing data which means not all providers report payment information to the CRAs,” Gaskin said. For instance, while roughly 92% of U.S. consumers have cell phones, only 5% of consumers have telecommunications-related data in their credit bureau files.
And previous legislation that was signed into law by President Trump included provisions that sought to broaden the range of information lenders consider when underwriting mortgages. The 2018 bill that rolled back Obama-era financial regulations required Fannie Mae FNMA, +2.55% and Freddie Mac FMCC, +1.50% to accept loans that lenders provided using alternative forms of credit scores in the underwriting process.
Others have also suggested consumers’ credit scores could potentially go down if this additional data is added in earnest to the calculations. For instance, utility companies can already report late payments to credit bureaus, but typically only do so after several months have passed. If utility companies were obliged to report all consumer payment information to the credit reporting agencies, consumers could be dinged for a single late payment, even if they quickly resolved the situation.
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