Equifax, Experian, and TransUnion announced they will soon remove tax lien and civil judgment data from some consumer credit records. The reason for this change is that many liens and most judgments fail to include vital pieces of information. Beginning on July 1, the public records data the firms use must include these data points: the consumer’s name, address, and either a social security number or a date of birth. Existing reports that fail to comply will be struck from the consumer’s credit record and new data that does not have that information will not be added.
Learn about other ways the real estate industry is calling for credit scoring to better reflect how people live their lives today.
Credit scores are weighed carefully by lenders in making decisions about loan terms and how much consumers can borrow, and can be very important in securing a sustainable mortgage. FICO estimates the changes will cause an improvement to about 12 million consumer scores; however the boost will be modest, likely less than 20 points.
In recent months, several lawsuits brought by states have been pushing credit reporting companies to remove some categories of negative data from credit score reports, such as information related to library fines or gym memberships. But some experts fear removing negative public record information could pose a greater risk to lenders who are trying to predict borrowers’ creditworthiness. For example, LexisNexis Risk Solutions, a company that provides such information to credit bureaus and lenders, says consumers with liens or judgments are twice as likely as others to default on loan payments.
“It’s going to make someone who has poor credit look better than they should,” asserts credit specialist John Ulzheimer, a former manager at Experian. “Just because the lien or judgment information has been removed and someone’s score has improved doesn’t mean they’ll magically become a better credit risk.”
Source: “Reporting Change Could Raise Credit Scores, Risk,” Mortgage News Daily (March 14, 2017)