If you are one of the 12 million consumers that have derogatory tax liens or civil judgments on your credit report you may see a score increase after these critical items are removed.
As of July 1, the three major credit reporting agencies, Equifax, Experian, and Transunion, will be removing the derogatory information on credit reports. The information being removed will be tax liens and civil judgments and will affect approximately 7% of all credit reports.
The credit reporting agencies have made the decision to eliminate these items after lawmakers recently settled within more than 30 states. Attorney generals alleged that tax liens and civil judgments were often attached to wrong consumers and hurting millions of Americans from obtaining credit.
The New Guidelines for the Reporting
The new guidelines will require all tax liens and judgments to match three of the four items to attach the derogatory information to the consumer accurately.
- Security Number
If the tax lien or civil judgment does not match 3 of these items it will not be reported.
What does the removal of Tax Liens and Judgements mean for Lenders
Tax liens and judgments are in the major derogatory events category; this could be rather concerning for lenders. The removal of these items may fool banks into to thinking the credit application may be a better credit risk. Lenders will need to find a way to balance the consumer’s needs versus the banks need to assess who is likely to pay back the loans accurately.
Benefits to Consumers
According to FICO, out of 200 million Americans with credit scores, 12 million will see an increase in their score. The increase could be at minimum 10 points and maybe as much as 40 to 60 point increase. The removal of this items could help consumers who were not able to get approved for items as little a cell phone contract without a large deposit, to as big as a lower interest car loan, or a home mortgage.