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Changes Affecting Your Credit Report

Credit bureaus are taking new sources of income, bill paying into consideration

En español | The world of credit reporting is constantly changing. You've really got to stay on top of this if you want to maintain a strong credit rating.

Unfortunately, many of us fail to keep abreast of important economic, legal or industry changes that can have a direct impact on our credit health. A survey from the National Foundation for Credit Counseling found that most Americans don't bother to check their credit reports at all — even though federal law gives adults in the United States the right to get those reports free of charge each year from

Woman bending red credit card, Credit reporting rules are changing

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Credit bureaus are taking new factors into account when computing your credit rating.

Here are four recent changes that affect your credit reports and score.

1. Your rental history is now included in your credit reports

For decades, the only housing payments that were tracked by credit bureaus were mortgage payments. Lenders would report whether you paid your mortgage on time and that payment history would be used to help calculate your overall credit score. Now "nontraditional" payments such as monthly rent are also being factored in.

The credit reporting giant Experian even has a unit called Experian RentBureau. It keeps tabs on how well renters are handling their housing obligations. And Experian includes residential rental payment information and rental history on its credit reports — a change that could impact millions of renters nationwide.

So the lesson here is: Pay the rent on time.

2. Your payday loans are being tracked

Speaking of nontraditional items, did you know that the credit industry is also now examining payday loans?

In 2012, FICO, creator of the widely used FICO credit score, rolled out a new credit score in combination with a company called CoreLogic — the FICO Mortgage Score Powered by CoreLogic.

This score takes into account far more data than traditional FICO scores. It's based in large part on transactions that had historically been under the credit radar, such as payday loans, debt settlements and rent-to-own agreements.

Advocates say including this information helps people who have no bank accounts or have "thin" credit files, by allowing them to demonstrate responsible behavior and build credit. But consumer advocates worry that broadening the realm of information contained in credit reports could create problems for low- and middle-income Americans. For instance, if a consumer has a legitimate dispute with a retailer or landlord and withholds payment, the person could nevertheless be reported to the credit bureaus and branded as fiscally irresponsible.

3. The credit industry is becoming better regulated

Some changes that will affect you greatly don't apply to you directly, but rather to the credit reporting industry. One of those changes became effective Sept. 30, 2012.

Since then, dozens of credit reporting firms — including the "Big 3," Equifax, Experian and TransUnion — have been monitored by the newly established federal watchdog agency, the Consumer Financial Protection Bureau, or CFPB.

The CFPB can now monitor their business practices, conduct on-site examinations and write new rules concerning how they operate.

The idea is to make sure that agencies that hold so much sway over Americans' financial lives are treating consumers fairly. Some experts expect that the CFPB will demand changes that will make mistakes on your credit report easier to fix.

4. You may have trouble getting a credit card on your own

If you've recently retired, gone through a divorce or been widowed, and then applied for credit on your own, you may have been rejected because of "insufficient income."

That's because in October 2011, a provision of the Credit Card Act of 2009 took effect making it tougher for nonworking spouses, ex-spouses or widows and people with limited incomes to qualify for credit on their own.

Under the new law, credit card firms are prohibited from basing credit decisions on a person's overall household income. Instead, they must evaluate only the individual applying. So if you can't show enough of your own income, you may not be able to get a new credit card or even a higher credit limit on an existing card.

This new rule was supposed to reduce risk in the marketplace and help ensure that only truly "qualified" people obtained cards — not, say, students who didn't even have jobs. But the law has wound up causing hundreds of thousands of people to be deemed unworthy of credit. It has hurt older Americans, widows, stay-at-home parents and spouses of all ages. It's an unfortunate catch-22 of the system that having no credit history is often deemed just as bad as having a history that's bad.

So this section of the Card Act has been revisited. Testifying in September 2012 before the House Financial Services Committee, CFPB Director Richard Cordray said his agency would use its rule-making authority to correct what he called "clearly an unintended consequence."

The fix should happen in early 2013.

Lynnette Khalfani-CoxThe Money Coach(R), is a personal finance expert, television and radio personality, and regular contributor to AARP. You can follow her on Twitter and on Facebook.

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