Millions of Americans are about to see a boost in their FICO scores, thanks to a recent decision from three major credit reporting firms to remove many tax liens and civil judgments from credit reports.
The three firms - Equifax Inc., Experian PLC and TransUnion – have decided to remove “tax-lien and civil-judgement data starting around July 1,” according to a trade group that represents them. According to the Wall Street Journal, the omissions will apply “if those data don’t include a complete list of at least three data points,” including a person’s name, address, and either a social security number or date of birth.
As AnnaMaria Andriotis notes in the Journal:
“Many liens and most judgments don’t include all three or four. This change will apply to new tax-lien and civil-judgment data that are added to credit reports as well as existing data on the reports.”
The reason for the shift? In large part, consumers have the CFPB and other regulatory advocates to thank; the consumer protection agency has argued for improved standards for public records data “by using better identity-matching criteria and updating records more frequently.” This is an important matter for consumers, as one in five has an error in at least one of their three credit reports, according to a 2013 FTC study.
The big three credit reporting firms have been settling over general practices matters – including how they handle such errors – on the state level since 2015. This upcoming action is significant, as the bureaus “rarely tinker with the information that goes on credit reports and that lenders consult to gauge consumers’ ability and willingness to pay back debts,” according to the Wall Street Journal.
So, how will the average consumer be affected? As Andriotis reports:
“Roughly 12 million U.S. consumers, or about 6% of the total U.S. population that has FICO credit scores, will see increases in those scores as a result of this change, according to the company that created the FICO system, which is used by lenders in most U.S. consumer underwriting decisions.
For most of these consumers, the score increase will be relatively modest. FICO projects that just under 11 million people will experience a score improvement of less than 20 points…
Scores are projected to rise by at least 40 points for around 700,000 consumers, according to FICO. In many cases, that can mean the difference between getting approved for credit or denied it.”
Many who have tangled with the timeshare industry and its debt collection firms may well have reason to cheer in a few months’ time, as the excision of civil judgments – which include cases in which collection firms take borrowers to court over an unpaid debt – could offer relief for those whose long and costly entanglement negatively impacted their credit.
Of course, this substantial change is not without its critics; as the Journal notes, these changes “could potentially increase risks for lenders who might not be able to accurately assess borrowers’ default risk,” and many people with real and significant blemishes on their record may “look more creditworthy” as a result of the policy.
Curious about this or any other trend in the consumer protection arena? Want to talk about the relationship between timeshares and your FICO score? We’d love to hear from you!
Led by Attorney Michael D. Finn with 45 years of experience, the Finn Law Group is a consumer protection firm specializing in timeshare law. Our lawyers understand vacation ownership as well as the many pitfalls of the secondary market of timeshare resales. If you feel you have been victimized by a timeshare company, contact our offices for a free consultation. Know your rights as a consumer and don't hesitate to drop us a line with any questions or concerns.
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