Major Credit Score Changes Coming Soon

THE CHANGE:

As of July 1, the nation’s three credit reporting agencies will remove and exclude tax liens and civil debts if the negative information does not include a customer’s name, address and Social Security Number or date of birth.

About half of liens and nearly all civil judgments (96% of them) don’t meet those identification criteria, according to LexisNexis Risk Solutions.

WHAT THIS MEANS TO YOU:

Your credit score may increase. FICO projects 11 million consumers will see a score increase of less than 20 points, while 700,000 will see a jump of 40 points or more.

If you are see an inaccurate tax lien or judgment on your credit report, you can now get a pass if your full identifying info can’t be verified.

WHY THIS IS HAPPENING:

In 2011 alone, 8 million complaints about wrong information in credit reports were received by the three major credit-reporting firms, according to the CFPB. A 2012 study by the Federal Trade Commission revealed that 21% of consumers had a verified error in their credit reports.

Fortune reports that since 2015, the three major credit-reporting firms reached settlements with more than 30 states over practices including handling of errors.

These changes aren’t meant to reduce the negative impact of failing to make tax payments. Instead, they’re meant to ensure that only accurate negative information is reported to the bureaus.

There is a short-term risk: people who legitimately avoided paying taxes benefit from the removal of negative information due to clerical errors. But technically, this is still the right decision. After all, of creditors can’t keep track of who owes them money, then they shouldn't be able to file negative information on your credit report.