Lecture Notes: Major Changes in Credit Scores

Introduction

• Major changes to credit scores happening on March 17, 2025.
• Discussion will cover three massive changes in credit reporting.

Credit Reporting Changes

Change #3: Removal of Medical Bills

• CFPB Rule Change: Medical bills to be removed from credit reports.

  • Rule finalized on January 7, effective March 17.
  • Potential increases of 30-60 points in credit scores for those with medical collections removed.
  • Important to note that debt still exists legally, even if removed from the report.

• Statute of Limitations: Varies by state, e.g., North Carolina is 3 years.

• Current Scenario: 49 billion dollars in medical debt affecting over 15 million Americans.

• Caveats:

  • CFPB actions have been paused; future uncertain under the new administration.
  • Important to dispute medical collections now.
  • Free resources (e.g., dollar4 and Patient Advocate Foundation) can help reduce or manage medical debt.

Change #2: Mortgage Lending Adjustments

• FHA and Fannie Mae/Freddie Mac Updates: Transition from Tri-Merge to Bi-Merge, and use of VantageScore 4.0 for mortgage lending.
  • This change is expected by end of the fourth quarter 2025.
  • May increase mortgage qualification rates.
• Market Advice: Current market deemed bad for home purchases due to high costs and interest rates.
• Credit Score Advice: Maintain high scores, avoid traps of low initial credit scores leading to high loan costs.

Change #1: Adoption of AI in Credit Scoring

• Introduction of AI: AI to be used for more accurate credit scoring.
  • AI will analyze alternative data not traditionally used, including:
    • Bank account transactions and cash flow.
    • Utility and telecom payment records.
    • Rental payment history.
    • Educational and occupational data.
    • Public records and court judgments.
    • Psychometric data and social media activity.
• Impact: Greater accuracy in credit assessments, potential for a system similar to social credit scores.

Dispute Beast and Credit Repair

• Dispute Beast: AI-powered credit repair tool offering 110% money-back guarantee if scores do not improve.
  • Attacks negative items using various strategies.
  • Demonstrated success with user testimonials showing substantial score improvements.

Recommendations and Tips

• Credit Monitoring: Monitor credit reports through annualcreditreport.com.
• Credit Reporting Agencies: Dispute inaccuracies immediately.
• Financial Habits: Improve financial management and budgeting to support better credit scores.
• Credit Union Strategies: Build relationships for better credit options.

Conclusion and Q&A

• Encourage proactive management of credit reports and disputes.
• Emphasize the importance of staying informed and adjusting to new credit scoring changes.
• Open floor for questions on credit-related topics.