If you’re not familiar with the information that goes in your credit reports and which does not, you’re not alone. Most Americans didn’t know about this until a news recently came out talking about the removal of an important piece of information from all credit reports collected by the three main credit bureaus. This is a big deal because of the positive impact it can do on your credit. Tax liens, a data that shows up in the public records section of your credit reports is the one that is in question. If you miss a tax payment, the government will issue a tax lien as a judgment against you.
Allow us to break down it down for you so you’ll understand what’s really going on.
Why remove the tax lien from credit reports?
Credit reporting agencies last July made a decision to remove all civil judgments and almost half of tax lien data from people’s credit reports. They did this because of a research published by the Consumer Financial Protection Bureau indicating incorrect identifying information that can link tax liens to the wrong person. It causes the credit score of the person who was wrongly issued with the tax lien to go lower, thus giving the person a difficult time to resolve the errors in their credit reports and in getting back the good standing they once had on their credit.
Will this impact everyone and improve their credit scores?
While there are about 5.5 million credit reports that will be heavily impacted by the elimination of tax liens and an improvement of some people’s credit scores by up to 30 points, not everyone will be able to benefit from this. There is only a small impact expected for those with stronger credit compared to those who have a weaker credit.
Here is a report from the CFPB that contains results of last year’s removal of civil judgments and some tax liens for you to have an idea on how the recent decision of major credit bureaus can affect people’s credit reports:
What are the three major credit bureaus who removed tax liens?
The first credit bureau who decided to remove tax liens from credit reports is TransUnion. They announced their intention to stop reporting tax lien date starting the week of April 16, 2018. They want to better meet the standards issued by the National Consumer Assistance Plan or the NCAP which is an initiative created by the three major nationwide consumer credit bureaus.
The other two major credits expected to remove tax liens from people’s reports that are involved in the NCAP are Equifax and Experian. They will start to delete tax liens also starting in April and as a result, the clients of AAA Credit Screening SErvices will finally have their credit reports free from tax liens after April. If you’re one of those clients who are concerned about the possible gap in reporting, AAA Credit Screening Services assures you that all consumer tax lien information is passed on to them by ordering a County Civil Report. The report will contain the information about claims, suits, and judgments made by individuals or corporations against other private parties or corporations.
Other industries such as debt collectors or collection agencies will also experience an impact to this new reporting law even though credit bureaus got the inaccurate information from furnishers of information like mortgage services and banks. Improving the accuracy of the collected consumer credit information is the main philosophy of this change.
Obviously, the removal of tax liens from your credit report cannot totally save you from having low credit scores because there is still a larger credit reporting puzzle that is being looked into by these credit bureaus to determine your ability to pay new debts. However, it is a good thing that these credit reporting agencies are reviewing their standards to offset any credit reporting errors that has been such an inconvenience to consumers for many years. If you want to find out your credit score, you can request a copy of them to the credit bureaus at any time.
