Oct 172014
 

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By G. Steven Bray

Many of us have experienced the frustration of trying to correct errors on our credit reports. Rep Maxine Waters thinks she has a solution. Let’s talk a look at her bill she says will protect consumers from errors on their credit reports.

Some of the highlights are:

– reduce to 3 years the length of time derogatory information can remain on the credit report;
– remove derogatory information that resulted from consumers taking out mortgagess they couldn’t afford;
– remove debts that have been paid off or settled; and
– remove derogatory information related to private student loans if the consumer has made two on-time payments in a row.

Now, I’m no big fan of the credit reporting agencies, but this proposal is just silly. We should call it the “Credit Mulligan Bill.” If you screw up your credit, you simply ask for a do-over.

If something like this passes, interest rates will rise. Creditors will not be able to identify those with poor credit habits, and those with good credit will subsidize the bad behavior.

A more reasonable step towards reforming credit scoring would be for Fannie Mae and Freddie Mac to adopt the new credit scoring models that we discussed a couple weeks ago.

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