Changes could improve credit scores for millions of consumers, may pose risks for lenders
FICO says about 12 million U.S. consumers will see increases in their FICO scores as a result of changes in how credit-reporting firms list tax-lien and civil-judgment data. Photo: Jonathan Ernst/Reuters
Many tax liens and civil judgments soon will be removed from people’s credit reports, the latest in a series of moves to omit negative information from these financial scorecards. The development could help boost credit scores for millions of consumers, but could pose risks for lenders.
The three major credit-reporting firms— Equifax, Experian and TransUnion—recently decided to remove tax-lien and civil-judgment data starting around July 1, according to the Consumer Data Industry Association, a trade group that represents them. The firms will do so if that data don’t include a complete list of a person’s name, address, as well as 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 civil-judgment data that are added to credit reports as well as existing data on the reports.
The result will make many people who have these types of blemishes on their credit reports look more creditworthy.
The three main credit-reporting firms jointly decided to make the changes. They did so as regulatory pressure has intensified in recent years around credit reports and the outsize role they typically play in lending decisions.
The Consumer Financial Protection Bureau earlier this month released a report citing problems it found while examining credit bureaus and changes it is requiring. Issues the agency cited included improving standards for public-records data by using better identity-matching criteria and updating records more frequently.