Beginning on or about July 1st of this year, millions of Americans will see their credit scores increase, anywhere from 20-30 points, or more. This stems from a change to what information is reported by the credit bureaus, or, more accurately, what information isn’t going to be reported.
As of July, most tax liens and civil judgments will no longer be reported to the 3 major reporting agencies; Equifax, Experian and Trans Union. In order for a tax lien or civil judgment to remain on a credit report, it would have to list three data points: a person’s name, their address, and either their Social Security number or date of birth. It’s uncommon that tax liens or civil judgments contain all three or four of these data points, meaning an expected 12 million people will see these negatives removed from their credit reports. As a result, just under 11 million Americans are expected to see up to a 20-point improvement in their credit score, while around 700,000 Americans could see a 20-to-40-point improvement in their FICO score.
The reason for this change is a recent report from the Consumer Financial Protection Bureau (CFPB) that outlined the shortcomings of the credit reporting agencies. One of those shortcomings was the need to improve the standards for identity-matching criteria, to insure that information on credit reports is more accurate.
What Does This Mean For Me?
What this means for you is, if you happen to have this information on your credit report now, is a boost to your score. This may help you qualify for better terms when applying for a variety of types of credit; mortgages, car loans, credit cards, etc. It may even help prevent an employer from using your bad credit as a reason not to hire you. What this doesn’t mean, however, is that these items can be ignored. If you have an open (unpaid) judgment or tax lien, it will need to be addressed prior to getting a mortgage, in most cases. While not on your credit report, lenders run other searches that will show these outstanding items. If you are applying for a mortgage, and have one of these items that is still open, it is best to let your mortgage professional know about it upfront, so it can be addressed early in the process and not cause delays later.
If you are not sure if you have any items that may be affected, or if you have not checked your credit yourself recently, we suggest obtaining your free annual credit report from www.freecreditreport.com. Once you have that report, be sure to check out our helpful guide to credit, at www.gorhf.com/guide-to-credit.