This study explains how credit score models can maintain accuracy and predictive power even if certain negative data – tax liens, civil judgments, medical and non-medical collections – are removed from consumer credit files.
The paper, Negative Data Suppression and Impacts on Credit Score Models, anticipates model-development questions raised under the National Consumer Assistance Plan (NCAP). Spearheaded by the three national credit reporting companies (CRCs)—Equifax, Experian, and TransUnion—the NCAP is focusing on a variety of measures aimed at making credit-data reporting more accurate and understandable for consumers. The CRCs are still making a final determination of the measures to be included in the NCAP, which would take effect in 2018. Preliminary recommendations call for removal from CRCs’ credit-file databases of all civil-judgment records, a substantial number of tax liens, and medical-related agency collections less than 180 days old. When present in a credit file, these data are highly predictive of default risk, so most modern credit-scoring models take them into consideration.