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Experian(EXPGF), Equifax (EFX) and TransUnion, the three main agencies that track your credit, have agreed to follow new guidelines to handle disputes on your reports, according to a settlement announced Monday by the New York Attorney General.

Credit reports have immense sway on a person’s borrowing ability. The firms track data from lenders, credit card issuers and collections agencies, among others, to produce credit scores for millions of Americans.

The scores determine if a person can rent an apartment, get a mortgage or car loan and also qualify for a credit card.

However, critics say the credit-reporting firms don’t do enough to address complaints about mistakes in credit reports. They say the firms just pass on complaints about inaccuracies to lenders rather than investigate the claims.

Under the new settlement, credit-reporting firms will be required to use trained employees to respond when a consumer flags a mistake on their file. Those employees will be responsible for communicating with the lender and resolving the dispute.

Credit-reporting firms only resolve about 15% of disputes they receive from consumers internally, according to a 2012 report from the Consumer Financial Protection Bureau. The remaining 85% are referred back to the lender to investigate.

“The nation’s largest reporting agencies have a responsibility to investigate and correct errors on consumers’ credit reports,” said NY Attorney General Eric Schneiderman in a statement. “This agreement will reform the entire industry and provide vital protections for millions of consumers across the country.”

The settlement also changes how the companies report unpaid medical bills, which account for the bulk of overdue debt on credit reports.

According to the Consumer Financial Protection Bureau, 52% of all debt on credit reports is from medical expenses.

Currently, past-due medical bills appear on credit reports as an account in collections. However, unpaid medical bills can occur when an insurance company delays payment, and is not the consumers’ fault.

Under the settlement, credit-reporting agencies will have to wait 180 days before they add unpaid medical bills to a credit report, giving consumers time to resolve insurance claims or catch up on payments.

Once an insurance company pays a delinquent medical bill, the negative record must be quickly removed from a credit report, regardless of when the claim was paid.

In addition, the settlement requires credit-reporting agencies to provide an additional free credit report so that consumers can verify that a dispute has been resolved. By law, borrowers are entitled to one free credit report per year.

The settlement also takes aim at “pay day loans.” It prohibits credit-reporting companies from including debt from lenders that have been named by the New York Attorney General’s office as predatory.

Most of the changes will take effect over the next three years and will be implemented nationwide. Visit wecu.com/personal-banking/checking/ or similar services to know more about bank accounts and credit.

Stuart Pratt, president of the Consumer Data Industry Association, the trade group representing the three credit-reporting companies, said the industry is committed to increasing transparency and enhancing the way it works with customers.

Source: CNN Money