What types of debts are affected?
So let’s break down the two types of exclusions that the three reporting agencies are looking to create: Tax Liens and Civil Debts.
A Tax Lien
A tax lien is a lien imposed by law upon a property to secure the payment of taxes. These are levied against properties when an owner has missed a number of tax payments. Once you pay a tax lien in full, it is released within 30 days, but a lot of times you retained the tax lien for an extended period of time, causing your credit score to take a negative hit during the duration, and up until the 30-day release window ends.
Civil debts come from court made decisions about private disagreements over money or property. The court decision is known as an order or judgment and directs one party (the debtor) to pay the other party (the creditor).
How many points will this actually save me?
Based on a study performed by Vantage Score Solutions, it is estimated that 8 percent of consumers will see an average score increase of 10 points if all civil judgments and tax liens were removed from credit reports. Although 8 to 10 points sounds insignificant, when it comes to mortgage lending and applications those points will affect a significant number of applicants.
As most people might only see a modest increase of around 10-20 points, for roughly 700,000 consumers they could see an increase of about 40 points.
In addition to these changes, the credit agencies will be updating public records they collect in a minimum of 90-day intervals.
“Equifax, Experian, and TransUnion continually seek ways to ensure the data they maintain on their consumer credit files is accurate and current, to best serve consumers and the needs of their business and government customers,” said CDIA Interim President and CEO Eric Ellman in a statement given to the press.
This is only one of the many things that can help you raise your credit. Thankfully these extra points will potentially help thousands of American’s qualify for loans and mortgages that they might not have before. It is always important to use any advantages we can, and the more knowledge we have the better. One of the easiest ways to start getting a handle on your credit is understanding one of the biggest contributing factors that affect every day American’s credit scores: Credits Cards, and How They Work. Read our article here to get more information.