The major credit reporting bureaus—Equifax, Experian, and TransUnion—are removing most tax liens and civil judgments from consumer credit reports. This policy change not only directly affects credit reports, but also credit scores because this data is used when calculating FICO and other scores. (Learn how the credit reporting bureaus calculate credit scores.)
Why the change? The change is a part of the National Consumer Assistance Plan (NCAP), which is a result of talks and an agreement between the three major credit reporting bureaus and 31 state attorneys general. The NCAP is an initiative to make credit reports more accurate and make it easier for consumers to correct any errors on their credit reports.
When do the bureaus have to remove a tax lien or civil judgment from your credit report? Under the credit reporting bureaus’ new policy, tax liens and civil judgments must be removed from your credit report unless the public record of the tax lien or civil judgment shows all of the following information:
So, Experian, Equifax, and TransUnion will remove tax liens and civil judgments that don’t have this information from credit reports. Also, the data furnisher of the public record information has to visit the applicable courthouse at least once every 90 days to obtain newly filed and updated public records.
How many people will this change affect? As a result of the new policy, the bureaus are eliminating 50% of the tax liens and 96% of civil judgments that were previously shown on credit reports. LexisNexis Risk Solutions predicts that around 11% of people will have a judgment or lien removed from their credit file, which means their score could rise by as many as 30 points, though the increase is more likely to be around 10 points.
Whether your report is affected by this change or not, you should regularly check your credit reports from all three bureaus to ensure the information is accurate. (Learn how to correct incomplete and inaccurate data in your credit report.)
Effective date: April 16, 2018