Qualifying for a mortgage can be a hurdle for many of today's buyers, especially ones with lower credit scores. For those with accounts in collections, there may be good news, reports the Washington Post's Michele Lerner.
A recent report from the New York Federal Reserve shows that consumers who had a collections account removed resulting from a new policy from the three credit reporting bureaus saw an average increase in their credit score of 11 points. Some consumers had an increase of more than 30 points in their score.
The credit reporting bureaus — Equifax, Experian and TransUnion— agreed to change their reporting of collections accounts, a policy that went into effect during the second half of 2017. As a result of the policy, the number of individuals with a collections account on their credit report dropped from 33 million to 25 million between June 2017 and June 2018.
Even a small boost in your credit score can make a difference. For about 20 percent of the credit reports reviewed by the Federal Reserve, the credit score increase pushed them above 620, which is often the threshold for a loan approval.
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