Revamping the Credit Score System

creditscore1Should the credit scoring system be revamped? In a controversial move, Rep. Maxine Waters (D-Calif.) proposed a federal amendment that would require the national credit bureaus to delete negative information such as late payments on credit cards and mortgages, foreclosures, and short sales after only four years. Currently, those negative marks remain for seven years.

If this passes, the “sins” that occurred during the housing bust years would be washed away now, enabling more Americans to start fresh sooner.

In Sweden, negative credit marks are deleted after only three years. In Germany, after four.

Arguing against a more lenient credit system is Stuart Pratt, president and CEO of the Consumer Data Industry Association. He said “82 percent of credit systems” worldwide require negative data to remain on record for four to 10 years.

On the side of leniency is the real estate and mortgage industry. They believe that four years is long enough to be “punished” for financial hardship, and that a revamped credit system would provide a much-needed boost to the housing and the U.S. economy.

Pratt told Kenneth Harney, syndicated columnist for “Nation’s Housing” that “it doesn’t seem right to us coming out of the Great Recession that we would erase predictive data.”

What do you think? Should late payments, foreclosures, and short sales be deleted from credit files after four years? Or remain as is for seven?


6 thoughts on “Revamping the Credit Score System

  1. I think it’s not too bad of an idea. I mean the banks got a bail out right? To be honest the financial industry had made a ‘killing’ off of the less prospous. They have been doing this for years! No one grace periods on credit cards as it was in the 80’s. Someone in the finanacial realm decided to charge a late fee for just being 1 day late and someone got very rich because of this grand idea. So. I think its time to changd some things a bit that will benefit the people for once. It’s like we can’t ever make a mistake or go through a tough time without being punished for it and it seems like we are punished forever. We all need 2nd or maybe 3rd chances. Just saying.

    1. I have to agree with you. I think seven years is too long, especially since a lot of the folks who suffered a foreclosure or short sale were good consumers who got caught in the bad timing of the real estate market. I would like to see them get a break and a fresh start on home ownership sooner rather than later.

    1. Five years would be a reasonable compromise. Think of the good borrower who had a medical emergency that drained their finances. Seven years is a long time to have those negative accounts on their credit report. I am in favor of shortening the time for negative marks.

  2. It’s very frustrating that banks and their criminal activity get a bail out, while the American people are left with the damage and no bail out. The credit scoring punishment doesn’t fit the crime so to speak! Americans suffer after one or two mistakes, and it is next to impossible to maintain a lifelong perfect financial situation. Keep in mind that old saying “no one is perfect” and that most of us are not without financial mistakes somewhere along the way. With identity theft being the fastest rising crime in the US, the government should be planning some way to revamp the entire system! Identity thieves are only punished with a prison sentence of 2 to 5 years and a fine, while the victim can suffer for the rest of their life! Trying to fix and correct credit mistakes is so overly complicated and ridiculously unfair. Every credit mistake should be treated individually because no one situation is the same. We must demand changes to protect us, as well as our children and their future.

    1. Paige, I hear your frustration loud and clear! I agree that the credit system needs a lot of improvement and that good people who have hit on hard times are overly penalized. On the positive side, there is something people can do to control their own credit. I have a brand new book released, Repair Your Credit Like the Pros. More info is here.

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