This change will affect as many as 11% of Americans who have a tax lien because of unpaid or unfixed taxes.
For some, this can mean an increase in credit scores by 30 points!
Consumer Financial Protection Bureau (CFPB) has found issues with tax lien data being reported to consumers credit profiles. As a result consumers with tax liens will see that data removed from their credit reports as of April 16th, 2018.
In July 2017, credit bureaus removed judgement data and about half of all tax lien data from credit reports. The new rule will remove all tax data in an effort to help consumers.
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How Tax Liens Affected Credit Scores
Tax liens, judgements, and other public data which as, up until recently been reported to the credit bureaus had an impact on consumers FICO scores.
Some consumers reported a drop in their credit rating by as much as 30-35 points when a tax lien was reported on their credit profile.
Now that the data will be removed many of these consumers will see an increase in their credit scores in the coming weeks.
This means better loan terms and lower interest rates on credit cards and loans.
How Credit Scores Increased from Removal of Judgements
Last July a rule was enacted that removed all judgements, public records, and half of all tax liens from credit reports.
The Consumer Financial Protection Bureau published a report that showed the credit score changes in affected consumers.
- 17% saw an increase in their credit score
- 75% saw little or no change in their credit scores
- 6% saw their scores increase above the prime range
- 66% of consumers scores stayed in the subprime range
FICO Score Ranges
FICO is the credit scoring company most major financial institutions use to determine an applicant’s borrowing power. Loan rates and terms are largely dependent on your FICO score range.
- 350-579 – Poor Credit
- 580-639 – Fair Credit
- 640-679 – Good Credit
- 680-719 – Great Credit
- 720 and higher – Excellent Credit
How to Find Out if Your Credit is Impacted
If you currently have a tax lien listed on your credit report it should be removed by next month. To ensure this change is made you need to get a copy of your credit report. You can do so on the Government spooned website www.annualcreditreport.com
You can also get your free credit score and report on several apps and websites. These sites not only give you your free score and report they have free credit monitoring as well. Once any change in your report or score is detected you will receive an alert.
You should sign up to keep an eye on the removal of your tax lien. Here are our recommended websites for getting your free scores and reports.