Todd A Langeness
Regional Sales Manager | NMLS #248695
Branch NMLS #1154232
Posted On May 01, 2018
Earlier this month, all three major credit bureaus, Experian, Equifax, and TransUnion, announced they would exclude tax liens from consumer credit reports. The move follows a report by the Consumer Financial Protection Bureau (CFPB) decreeing the removal of public records for judgments or liens from credit reports could boost credit scores for 17% of American consumers. In July of 2017, credit bureaus removed almost all civil judgment data and about half of tax lien data from credit reports. As of April 16th, 2018, the rest of this tax data has been removed.
The CFPB recommended these changes because of recurring problems with reporting this type of data. According to the Federal Trade Commission (FTC) an estimate of 20% of consumers have errors on their credit report that are negatively impacting their score. Credit monitoring is one of the first lines of defense against credit errors. However, even when an error is discovered and reported it may take some time for the credit bureaus to remove it, hurting the consumer’s ability to secure loans like a mortgage. Though this move will affect less than one-fourth of consumers, it could improve this demographic’s access to mortgage financing and other lines of credit.
LexisNexis Risk Solutions estimates that consumers who were impacted by judgments or liens could see their credit scores improve by as much as 30 points overall. FICO credit scores, the most widely accepted credit score, range from 300 to 850. Typically, scores between 700 and 749 are considered good credit and any score above 750 is considered excellent credit. A 30-point boost could be enough to raise a credit score from Good to Excellent or even Fair to Good, improving the consumer’s interest rate and terms for lines of credit like mortgage loans.
Mortgage lenders use a consumer’s credit score to evaluate their ability to repay a mortgage loan. Improving your FICO credit score is one way to lower the interest rate, reduce or eliminate mortgage insurance, and secure better repayment terms. Most financial professionals recommend a home buyer start credit repair at least six months to a year prior to shopping for a home.