Big news out of the New York Attorney General’s office. From CNN:

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.

This is huge news. Disputing information on credit reports is a big part of credit repair, and if you’ve ever gone through it, you know it can be frustrating to watch the credit bureaus acting in seemingly incomprehensible ways to simple requests like “this account isn’t mine; please delete it.”

It’s not clear at the moment how this will affect people in other states, if at all. The settlement could prompt action from other states’ attorneys general in a piecemeal fashion. The feds could even get involved in the form of the CFPB.

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.

Which is exactly the problem that those of us in the know have been trying to draw attention to for years. If you dispute an inaccurate entry on your credit report, and the credit bureau just takes the debt collector’s word for it that it is correct, without doing any research of their own, that’s guaranteed to perpetuate credit reporting errors. Maybe that’s part of the reason 70% of credit reports contain errors?

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.

…in other words, for 85% of credit disputes, they just take the lender’s word for it without conducting even a minimal investigation.

Again, this is a game-changer. Hopefully this will translate to better resolutions of disputes fairly quickly.

There’s more to the settlement with regards to medical bills, so the entire article is worth a read. Oh, and there’s this:

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.

That’s right, payday loans can show up on your credit report. And unlike other kinds of tradelines, they don’t help you even if you pay them off. Taking out a payday loan is considered a credit risk in and of itself. And don’t even get me started about the interest rates.

Do not ever take out a payday loan (or equivalent, like an auto title loan), under any circumstances.