National Consumer Assistance Plan (NCAP)
While many times it may feel like Credit Reporting Agencies (CRA) neglect
to maintain accurate reports, it is actually in their best interest to
ensure that credit is being reported accurately. CRAs make money by selling
your information to potential lenders, employers and creditors. If they
were to gain a reputation for inaccurate information, they could lose
the confidence of their customers. It is with everyone's best interest
that the three major credit bureaus reformed their policies by creating the
National Consumer Assistance Plan ("NCAP"). The NCAP improved upon the current credit reporting
procedure as outlined in the Fair Credit Reporting Act through the introduction
of a series of new policies and procedures.
The first major change introduced in the NCAP, is in how
Medical Collections are processed. When a consumer would receive medical treatment they would
initially take on the cost of the treatment and then file the cost of
their treatment through their insurance. In many instances CRAs could
process this debt right away and as such the debt could be listed as a
bad debt on a credit report. Even after the debt would be resolved with
the consumers, the negative information could stay on the consumer’s
credit report for up to 7 years. In order to prevent this process from
continuing, NCAP implemented a
180 day waiting period to give time for any medical debt to be cleared with a consumer’s
medical insurance. This procedure helps protect consumers from having
their credit reports getting hit with negative information that should
never have been listed in the first place.
Another major change implemented by the NCAP is in regards to what debts
can be eligible for credit reporting. In the past, credit reports have
been surmised of any outstanding debts a person has. This would include
loans, mortgages, and credit card debts as well as Government fines and
tickets. As part of the NCAP, the credit bureaus determined that a credit
score should only reflect history with debts that were entered into voluntarily,
such as a contract with a credit card company. Through this change, debts
that were incurred involuntarily, such as traffic tickets or other forms
of government fines and fees will be precluded from being listed.
Fixing Bad Credit Scores
The last major changes enacted by the NCAP are designed to improve the
dispute resolution process. Credit reporting agencies create credit reports
for millions of people across the country, and as a result, it is not
uncommon to find mistakes and outdated adverse items on credit reports.
Consequently, this can cause an unjustified bad credit score due to the
fair credit reporting act (FCRA) provides for a process whereby disputes can be submitted to the
credit bureaus and the credit reporting errors can be fixed.
However, under the NCAP, the rights provided under FCRA have been extended
even further. For example, if a dispute is filed and the CRA validated
the information, then the consumer will be entitled to a second free credit
report. The reason for granting a second Credit report is to enable you
the consumer the ability to check and see that any confirmed false information
has been removed from your report. Alternatively, in cases where an investigation
results that the claims are invalid, the credit bureau will provide additional
information as to how to submit a further dispute.