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Consumers with civil judgments or tax liens may see a boost in credit scores

July 1 marked the date new rules went into effect basically removing nearly all civil judgments and some tax liens from credit reports.

On July 1, 2017, consumers with tax liens or civil judgments should see a boost in credit scores due to a new rule that holds public data to new standards. Public record data must now include a consumer’s name and address, as well as their Social Security number or date of birth, to appear on their credit file, according to the Consumer Data Industry Association.

What this means is that Experian, Equifax and TransUnion will purge old judgments and tax liens that don’t meet the new enhanced standards and new records of civil judgments and tax liens that don’t meet the minimum identifying requirements of Social Security numbers or date of birth will not be reported. Consumers with tax liens and/or judgments should not have to take any action. The process is expected to take several weeks.

FICO, the largest provider of credit scores, conducted an analysis that concluded approximately 6% of consumers, or about 12 million people will see a judgment or tax lien removed from their credit reports.

FICO estimates that most of the people who have public items removed will experience score increases of less than 20 points. While the point increase is modest, it can still make the difference in approval or denial of consumers who are on the edge of having good credit vs. fair credit. For instance, a good credit score is considered from 700 to 749 while fair credit ranges from 650 to 699. A few more points could mean a lower interest rate if the increase moves you into a higher category.

Nearly ALL civil judgments should be removed because they simply don’t meet the new standards. However, some tax liens currently meet the new enhanced reporting standards which means they will remain on consumers’ credit reports. When it comes to bankruptcies, most already include the required information of name and address, as well as Social Security number and date of birth, therefore it’s unlikely consumers’ with bankruptcies will see a change on their reports.

Consumers do not have to take any action to have the records removed. The new policy went into effect July 1st but the actual removal of judgments that do not meet the new rules will begin July 10; and nearly ALL civil judgments will be removed starting July 10 as well.

Under the new rule, Experian, Equifax and TransUnion will have to satisfy a requirement of visiting courthouses to obtain newly filed and updated public records at least every 90 days. A consumer’s name, address, Social Security number and/or date of birth must accompany the reporting of all public records including civil judgments, tax liens and bankruptcies.

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