Beginning July 2017, the “Big 3” Credit Bureaus, TransUnion, Equifax and Experian are making a big policy change as part of their agreement with a group of State Attorneys General regarding their handling of all civil judgments and about half of all tax liens that are currently reporting to the credit bureaus, as well as any that will report in the future.
In essence, the credit bureaus have determined that the accuracy of these items is not up to par with their usual reporting guidelines so to avoid any future problems (and likely legal troubles) they are agreeing to remove these items from the credit reports of consumers altogether.
For some consumers, this will result in a credit score increase but don’t get too excited just yet…FICO is estimating that the score increase will only be about 1-19 points on average for the majority of people, however a small percentage will see a bigger score boost (20-39 points) on their credit from these changes and lastly a very small group will see a boost of 60 or more points added to their score. It is estimated that 12-14 million people have liens or judgments that could be removed from this change.
The flip side of the coin will be the loss of the extra leverage for those who received the shorter end of the stick on a civil court case in their favor. Traditionally these items reporting on the reports of those who owed them money was an extra form of leverage to hopefully one day get paid what was owed to them. The reporting of this information was also a warning to let other potential lenders know that the consumer may be a higher risk to them when making a lending decision based on the fact that a case went all the way to court without a resolution. The tax lien information reporting on the credit report was also intended to serve the same purpose.
A bigger question will be the impact on potential home borrowers in the months following this decision. Many are expecting the judgment and tax lien information to still show up with the Title Company before the final home buying process is completed even though it is not necessarily impacting the actual credit score. In most cases, a potential home buyer is not able to proceed with the home purchase until all judgments or tax liens have been resolved. These new changes will create possible issues with these roadblocks showing up at the end of the buying process which can create even bigger headaches and hassles for consumers who are under the impression they are no longer being held back by these public record items because they are no longer reporting on their credit reports.
If you are in need of a credit report analysis and review please contact us at 888-900-5138 for a Free Credit Evaluation or visit www.Credit360Consulting.com