This past spring, the Consumer Data Industry Association (CDIA), the trade association representing the three major credit reporting agencies (CRAs), announced some big credit reporting changes that, as of July, would impact the credit reporting of millions of tax liens and civil judgments.
Per the CDIA, Equifax, TransUnion, and Experian would be removing the vast majority of civil judgment data and approximately half of the tax lien data which was, at the time, appearing on consumer credit reports. Based on an analysis completed by credit scoring giant FICO, the CDIA’s announcement meant that around 6% to 7% of consumers with a credit score, or approximately 12 million consumers, could be impacted by the data removal. VantageScore performed a similar analysis with similar results.
Credit Scoring Impact
Despite the excitement the CDIA’s announcement generated among consumers, the credit scoring impact of the removal of this derogatory public record data was downplayed by pretty much everyone on the industry side of the equation. “Analyses conducted by the credit reporting agencies and credit score developers FICO and VantageScore show only modest credit scoring impacts … as a result of the changes to public record standards,” said Eric Ellman, CDIA interim president and CEO.
That’s partly because consumers with a lien or judgment on their credit report are likely to have other credit problems dragging down their scores as well, according to FICO. “Therefore, impacted files tend to score relatively low, even after these public records are removed, and more than 75% of FICO Score increases are less than 20 points,” FICO said in a statement.
How to Tell If You Got Lucky
Regardless of the tepid impact, even a 20-point credit score increase could be significant for many consumers, particularly if it helps you cross the threshold from fair to good credit.
Discovering whether you were one of the lucky consumers who had a derogatory public record removed from your credit reports this summer is, thankfully, very easy. You simply need to obtain a copy of each of your three credit reports — from Equifax, TransUnion, and Experian– and give them a quick review.
If you haven’t already used your annual allotment, you can claim a completely free credit report from each of the three CRAs via the website AnnualCreditReport.com. Even if you’ve already claimed your free reports, there are still a number of websites where you can access your credit reports online for free or a fee.
Most of the credit reports that are disclosed to consumers are cosmetically designed to separate your data into different categories, thus making them easy to read. Simply find the public records section of your report and scan it to see if your tax lien or judgment is still present. If the entry is gone, you were probably one of the lucky consumers who benefited from this new policy change.
Keep in mind, of course, that there is still nothing illegal about an accurate judgment or tax lien appearing on your credit reports. The CRAs have agreed to enhanced public record data standards in an effort to comply with their 2015 settlement with 32 state attorneys general (and likely in an effort to appease regulators such as the Consumer Financial Protection Bureau as well).
However, the Fair Credit Reporting Act (FCRA) still absolutely allows for accurate judgments and tax liens to be included on a credit report. In short, if you were not lucky enough to see a public record removed from your credit reports, then, unless it is inaccurate, there’s really nothing you can do to legally force it to be removed from your reports earlier than is required by the FCRA.
Finally, keep in mind that just because a judgment or tax lien has been removed from your credit reports does not mean it cannot still cause you problems. Many lenders, especially mortgage lenders, will perform a public records search of their own in an attempt to uncover items that might not appear on your credit reports. Furthermore, the IRS still has the ability to make life painful for you in a variety of ways if your tax liens remain unpaid.
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John Ulzheimer is an expert on credit reporting, credit scoring, and identity theft. He has written four books on the topic and has been interviewed and quoted thousands of times over the past 10 years. With time spent at Equifax and FICO, Ulzheimer is the only credit expert who actually comes from the credit industry. He has been an expert witness in over 230 credit related lawsuits and has been qualified to testify in both federal and state courts on the topic of consumer credit.