Many Borrowers May See a Credit Score Increase

March 27, 2017 12:00 am

Credit scoring bold text on a piece of white paperAccording to a recent article from The Washington Post, as of July 1, 2017, the three major credit bureaus, Equifax, Experian and TransUnion, will stop using civil judgment and tax lien information to determine credit scores. Civil judgment is debt owed to the government by someone who has lost a legal dispute, usually involving monetary damages. A tax lien is imposed on a property when the owner neglects to pay taxes on it. Both of these things negatively impact credit scores, causing a potential increase in many credit scores once their information is no longer used.

VantageScore Solutions conducted a study that estimated 8 percent of consumers would see an average 10-points increase on their credit score once the change is made. While this may be good news for borrowers, many mortgage lenders are concerned that the elimination of these factors will limit their evaluation of applicants. Tim Coyle, senior director of real estate and mortgage for LexisNexis Risk Solutions, stated that borrowers who have a civil judgment or tax lien on their file are 5.5 times more likely to result in foreclosure than those who do not.

Consumer Data Industry Association, the bureaus’ national trade organization, stated that the changes are part of a “National Consumer Assistance Plan” following a 2016 settlement for credit reporting accuracy. Consumer Data Industry Association believes that the change will improve accuracy in consumer credit reports going forward.

To learn more about this upcoming change, click here.

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