Big Three CRAs Will Remove Many Tax Liens & Judgments from Credit Reports
Acting through their trade association, Experian, Equifax and TransUnion announced they will remove many tax liens and civil judgments from credit reports starting July 1, 2017. This will improve credit scores of millions of people.
The data will disappear if it does not include a complete list of at least three data points: a person’s name, address and either a social security number or date of birth. Many liens and most judgments don’t include all three or four. This change will apply to new tax-lien and judgments added to credit reports as well as existing data on the reports. In addition, if public court records aren’t checked for updates on lien and judgment information at least every 90 days, they will have to be removed from credit reports.
About 12 million U.S. consumers, or about 6% of the total U.S. population that has FICO credit scores will see increases in their scores as a result of this change, according to the company that created the FICO system, which is used by most lenders. FICO projects that about 11 million people will experience a score improvement of less than 20 points. Scores may increase by at least 40 points for around 700,000 consumers, according to FICO. Such an increase may mean the difference between getting approved for credit or denied.
A representative of LexisNexis Risk Solutions says that nearly all judgments will be removed and about half of tax liens will be removed from credit reports as a result of the changed approach. However, he stated LexisNexis will continue to offer the data directly to lenders. In addition, lenders will still be able to check public records on their own to find this information
The changes are likely being made because data without the identifying information was often inaccurate. In 2015, the credit-reporting firms reached a settlement with New York’s attorney general over several practices, including how they handle errors. This was followed by one with another 31 states. One more state, Mississippi, followed last year.
The settlements with the State Attorneys General earlier prompted the three credit agencies to remove other negative data from reports, including non-loan related items sent to collections firms, such as gym memberships, library fines and traffic tickets. The firms also will remove medical-debt collections paid by a patient’s insurance company from credit reports beginning in 2018.
These changes were reported today in the Washington Post and Wall Street Journal.