If you have a civil judgment or tax lien on your credit report, we’ve got some good news for you: It might be gone come July 2017.
That’s when the three major credit bureaus – TransUnion, Equifax and Experian – will start to require more documentation for such public records. As a result, all existing civil judgments as well as more than half of all tax liens will be wiped from consumers’ credit reports, according to the bureaus. And the average person who’s affected will see his or her credit score rise by about 10 points.
While any credit-score increase associated with these changes is unlikely to exceed 20 points, every piece of negative information that falls off your credit reports is good for your credit score. So we definitely recommend reviewing your credit reports on a regular basis, both to confirm the removal of problematic public records and to make sure no other mistakes wind up costing you money.
Below, we’ll explain what exactly civil judgments and tax liens are as well as the odds of your score improving due to their removal.
What’s Being Removed From My Credit Report?
Everyone’s on board for higher credit scores. But a lot of us aren’t up on the latest credit-industry lingo. And the terms “civil judgment” and “tax lien” are hardly self-descriptive.
So here’s a quick overview of the two types of records that the credit bureaus are cracking down on:
- Having a Civil Judgment on your credit report means you’ve lost a lawsuit and the judge has ordered you to pay the debt for which you were sued. This tells potential lenders that the government is first in line for your disposable income, meaning less is left for credit card and loan payments.
- A Tax Lien turns physical property – usually a house or car – into collateral for an unpaid tax obligation. It basically prevents you from selling that property before paying the government what it’s owed.
Both will be listed in the Public Records section of your credit report. Your WalletHub Credit Analysis grades can also quickly give you a sense of whether you have anything to worry about.
Will My Credit Score Improve?
You can monitor your credit score for free on WalletHub to see if it improves. WalletHub is the only site with free daily credit score updates. So you’ll know as soon as anything changes.
We can also learn a lot from some research that VantageScore – one of the leading credit-score companies – released about a year ago, examining what would happen to credit scores if civil judgments and tax liens were removed from consumers’ credit reports entirely. The results aren’t perfectly applicable to the present situation, as tax liens with the proper documentation will remain in real life. But they do provide a pretty good sense of what to expect.
Here are the percentage chances of an individual’s credit increasing, in the absence of tax liens and civil judgments:
We strongly recommend that you review your credit reports from time to time in the coming months. For one thing, you’ll need to confirm the removal of civil judgments and tax liens, or at least inquire about any that remain. In addition, there are plenty of other credit-report errors to watch out for. And catching them early will save you a lot of time, money and effort.
You’re entitled to a free copy of each of your major credit reports once every 12 months from AnnualCreditReport.com. And you can get free daily updates to your TransUnion credit report on WalletHub.