The three major credit bureaus (Equifax, TransUnion, and Experian) have made the (somewhat monumental) decision to stop collecting and reporting on tax liens and certain types of civil judgments. What this means is that people with tax liens and various civil judgments may soon get a massive credit boost.
To break it down further, tax liens are usually reported to credit bureaus when property owners are late paying taxes. If you have been late paying taxes in the past, your credit score was negatively impacted. With the new change, your credit score will not be lowered due to this type of late payment.
The civil judgments that will be forgiven when it comes to credit scores are those judgments decided in civil disputes - things like property damage or other types of damage that you may have had to pay in the past. You may not have known this, but those types of disputes negatively impacted credit scores until this point.
With better credit scores (and things like civil disputes and tax liens no longer dragging scores down), a significant amount of people will now be eligible for loans that they were not eligible for prior to this decision. It has been estimated that nearly 8% of consumers will see a credit score boost thanks to this new decision by the three major credit bureaus.
How much will your credit score rise if you fall into either one of the aforementioned categories? That estimate is around 10 points. In the credit score game, ten points are, indeed, a large amount - enough to make a consumer that wasn’t eligible for, say, a home loan suddenly eligible. For consumers, this is great news.
For landlords, mortgage lenders, and those that check credit scores, it all becomes a bit tricky. Those that dole out credit will find it harder to do thorough background research, but it can be argued that things like tax liens and civil disputes shouldn’t play into credit anyway. What do you think? We’d love to hear from both sides!