Credit Bureaus Require Proof of Civil Judgments and Tax Liens

Credit Reporting Bureaus will soon Require Proof before including Civil Judgments and Tax Liens in Credit Reports

By: Steven Rich, MBA

CBS News reports today (March 14, 2017), “Why your credit score could soon get bumped up”

The importance of Credit Scores cannot be emphasized enough as they can determine whether consumers can obtain loans to pay for their home, a vehicle, and how much deposit will be necessary to obtain utilities services.

Later this year, the three major credit reporting bureaus will change their ratings on two pieces determined to be negative: civil judgments and tax liens.  Either item showing up on a credit report will lower the credit score making it more difficult to obtain mortgages, loans, and no or low deposit utility services.  According to the FICO, around 11 million consumers in the U.S. will experience an increase in their credit scores.

Experian, Equifax and TransUnion will all ignore civil judgments and tax liens later this year when determining a consumer’s credit score.  One reason for this change of heart is a result from consumer advocates and lawmakers pressures to fix errors and loosen their policies on consumer credit reports.  In 2015, the three agencies settled a lawsuit brought by 31 states regarding errors.  The Big Three agreed to make it easier to fix errors on credit reports.

Two of the biggest complaints about errors in credit reports involved civil judgments and tax liens involving consumers with similar names causing confusion and erroneous negative information appearing on the wrong consumer’s credit reports.  In the future, before those two items can be included in a person’s credit report they must be supported by at least three items of personal information including the consumer’s name, address, or social security number.

In addition to the required three pieces of information, the three agencies will require checking public court records every 90 days to update civil judgments and tax liens.  Failure to conduct these updates will result in the removal of this information from credit reports.

There are over 200 million U.S. adults with credit scores according to FICO and this new policy will help 11 million of them.  FICO predicts that most consumers will experience a modest increase in their credit scores of 20 points.  Another 700,000 will enjoy an improvement of 40 points.  FICO scores range from 300 to 850 where the higher scores represent greater creditworthiness.

The new policy takes effect on July 1st according to the Consumer Data Industry Association in a statement to CBS Money Watch.

This is being hailed as a victory for consumers by consumer watch groups.

Copyright © 2017 -- Steven Rich, MBA