As part of their plan to improve credit report accuracy, the three consumer credit reporting agencies (Equifax, Experin, and TransUnion) announced changes to what delinquent credit will be identified on credit reports.
Effective July 1, 2017, most civil judgments and tax liens will no longer be shown on credit reports. This is because many of these public records do not meet the credit reporting agencies' new stricter standards for containing all of the personal information the agencies now require(like Social Security numbers, for example). The new standards are meant to protect consumers by preventing false identity matches and incorrect reporting information.
What does this change mean to potential homebuyers with tax liens and judgments on their reports? According to research by FICO, about 12 million people will have a tax lien or judgment removed from their credit report. The majority will see a modest lift (20 points or less) in their credit scores as a result.
How does this change impact getting approved for a home loan? Fannie Mae, a leading source for mortgage financing, responded to the credit report change, noting existing policy will still require those with genuine delinquent credit, including tax liens and civil judgments, to pay these debts at or prior to closing.
However, the new public record standards will be especially beneficial to the thousands of consumers with inaccurate information on their credit report due to mismatched records. They will no longer experience the frustration of trying to remove erroneous judgments and tax liens from their credit reports before being approved for a home loan.
If you or someone you know has been refused a home loan because of tax liens or judgements on a credit report, please don't hesitate to call and see if these changes can be of benefit.
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