Why Your Credit Score Climbed 20+ Points in the Last Month

Beginning last month, the three major credit reporting agencies implemented a new policy at the behest of numerous consumer advocacy groups. The new policy forces TransUnion, Experian, and Equifax to no longer report tax liens and civil judgments without having complete information. This will reportedly improve the accuracy of 12 million credit reports, raising scores by up to 60 points in some cases.

Even with this policy, credit reporting agencies have a long way to go until they've earned the trust of the public or government officials. The Federal Trade Commission reported in 2012 that 20% of all consumers had an error on their credit reports—and that was only among the consumers who had reported their errors to get them corrected. The vast majority of these errors affected their score negatively. The new policy is (hopefully) the beginning of a trend where reports are handled with more care and accuracy.

Today, credit reporting is still riddled with inaccuracies. Before this policy, credit reporting bureaus could report tax liens and civil judgments without the correct name, address, SSN, or birth date of the individual. For people with common first and last names, these practices wreaked havoc with their credit score. People who are affected by the new policy will likely see a score increase of 20 points or less—while others may see an increase of 40-60 points.

That's not a small amount. Twenty points could mean the difference between paying an extra $50,000 during the life of your mortgage. It could mean getting a nice apartment in the center of town instead of commuting. It could mean being able to qualify for an emergency loan when disaster strikes. That's why many consumer advocates believe this policy is so vital—it could help open up opportunities for people who have been denied them due to a typo or simple mistake.