Public Records Data Reporting for Credit Reports
Landlords that use consumer credit reports as their primary tenant screening tool for rental qualification may have noticed a difference in the public reporting data section of the credit report.
The three national credit reporting agencies (NCRAs), Equifax, Experian, and TransUnion have implemented enhanced standards for the collection and timely updating of public records data in consumer credit reports. The enhanced standards are part of the National Consumer Assistance Plan (NCAP) to improve credit report accuracy and the dispute resolution process.
The enhanced standards require public records data to show personal identifying information (PII) for inclusion in a consumer credit report. To be reported, public records data must now contain the consumer’s identifying information – his/her name, address, and Social Security number and/or date of birth. Additionally, public records data must be updated from the data sources on a timely basis, i.e., at the courthouse at least every 90 days.
The NCRAs analyzed their public records databases and found the majority of civil judgment data and approximately half of tax lien data shown on credit reports did not meet NCAP standards. That data was excluded from consumer credit reports during 2017. In compliance with NCAP requirements, civil judgment data records that do not meet the enhanced standards will no longer appear on consumer credit reports.
After further review and monitoring of tax lien data, in April 2018 the NCRAs removed all remaining tax lien data from their respective public records databases. Tax lien data will no longer be reported on consumer credit reports.
Bankruptcy Records
Bankruptcy records already meet the NCAP enhanced standards of minimum personal identifying information. Therefore bankruptcy public record data will continue to be reported on consumer credit reports.
Additional changes to credit reporting
To enhance accuracy of information shown on credit reports, NCAP standards:
- Require all data furnishers to use the most current reporting format.
- Eliminate the reporting of debts that did not arise from a contract or agreement by the consumer to pay, such as traffic tickets or fines.
- Prohibit medical debts from being reported on credit reports until after a 180 day waiting period to allow insurance payments to be applied.
- Remove from credit reports any previously reported medical collections that have been paid or are being paid by insurance.
- Require debt collectors to include original creditor information with each account being reported for collection.
- Require debt collectors to regularly update the status of unpaid debts and remove debts no longer being pursued for collection.
- Monitor data furnishers for adherence to the announced reporting requirements and take corrective actions against data furnishers for noncompliance.
NCAP Standards and Landlords
Landlords should always conduct due diligence in qualifying an applicant for tenancy. Due diligence should be a comprehensive tenant screening process utilizing various types of screenings to develop a full assessment of applicant risk. Since a consumer credit report does not show prior non-standard civil judgments, a landlord must be sure to utilize tenant screenings that can provide eviction history and/or history of property damage either incorporated into a full screening report or supplied as a stand-alone screening.
Landlords have long relied upon the consumer credit report and credit score to alert them of red flag issues that could present a financial risk. Credit reports and credit scores will still serve as critical tenant screening tools and red flag issues from all tenant screenings will still require investigation. Landlords have the responsibility of duty of care to conduct all due diligence to protect the safety and rights of tenants. The collection of data from applicable screening sources and adequate evaluation of applicant data help make an informed decision for selection for tenancy.
There has been a concern that the removal of non-standard public records data from credit reports could improve an applicant’s credit score, although most industry analysts point out that to date the NCAP changes have had only a modest impact on credit scoring. However even a modest positive change to a credit score could cause some applicants to appear more credit worthy and therefore qualify for selection even though the potential credit risk has not changed.
Consumer credit data analysis has shown that historically consumers with civil judgment and lien records are more likely to default on other debt obligations than would consumers without civil judgment or lien records. The new NCAP standards do not change consumer behaviors. Consumers that are more likely to default on debt obligations may do so regardless of data reporting rules. There may be other derogatory items on the credit report that will keep the consumer’s credit score low and make removal of judgments and liens a non-factor in tenant decisioning. Landlords should keep in mind that even prior to the NCAP implementation of enhanced standards; the absence of public records data in a consumer credit report was not a guarantee that the applicant had no public records.
Contacting previous landlords has always been recommended as a best practice for landlords to discover if tenants at a previous rental property “left early” and under what circumstances. Landlords should give higher priority to contacting landlord references and verifying rental history to document reported behaviors and assess potential risk. Interviews with previous landlords or property managers may be the only source of relevant information regarding a former tenant’s property damage and unpaid rents.
Screening options for eviction/damage history might include manual civil records searches with the local courthouse records or networking with other landlords through a regional landlord association. A landlord may want to contact his tenant screening provider to determine what services/searches the provider can provide for eviction records history.
Medical Debt
The changes in reporting of medical debt may benefit some applicants by allowing them time to resolve medical insurance and billing issues, The NCAP mandates a 180-day waiting period before a creditor may report medical debt. The grace period in reporting medical debt could have a positive effect on the applicant’s credit score and potentially help an applicant qualify for rental housing. Whether a credit score would actually change significantly due to new requirements for medical debt reporting would be dependent upon the applicant’s credit history and the credit reporting model used for scoring. Some credit scoring models do not weigh medical collections as heavily as other types of collection accounts. If a tenant screening service is used to obtain consumer credit reports, it may be beneficial for a landlord to understand which credit reporting agency is used to prepare the credit reports and obtain a sample report that and scoring formula that the reporting agency uses. Some landlords may have rental standards that address the issue of medical debt when qualifying an applicant for tenancy. It may be advisable to review any such policy and ensure the policy is aligned with current reporting requirements.