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Tax Liens, Judgments Removed from Credit Reports: Update

July 10th, Equifax, Experian, and TransUnion started removing judgments and tax liens from people’s credit reports if the item did not include their correct name, address, social security number and/or date of birth.

Disarmingly, lenders have the option to obtain this data from other information-providers such as LexisNexis (a research and information providing company). However, this does not give the lender the authority to add it back to your credit report; thus, your higher credit score remains. Since lenders base the interest rate and other terms on the almighty credit score, this is a WIN for you.

If a lender discovers a “hidden” tax lien or judgment, the lender has the option to deny your loan if they choose, because lenders have the right to protect themselves from a perceived financial risk.

The good news is that Fannie Mae has stated that they are not requiring lenders to obtain the data independently in order to approve a loan. Fannie is still studying the information and looking for feedback from lenders.

Meanwhile, the Fair Isaac Co. has released a study of millions of credit files to determine what affect this change will have on credit scores. So far, it looks like people’s credit scores are going up by 20 to 60 points!

Of course, it is impossible to predict what change will occur for you personally, because FICO scores are based on your entire credit report, not on just removing one item.

And remember, just because a tax lien is removed from your credit report, it doesn’t mean that you no longer owe the IRS money. Unpaid taxes can result in a wage garnishment or other legal action. Therefore, I recommend following the instructions in Chapter 19, Repair Your Credit Like the Pros, which is available here.

Many thanks to credit pro Chad Kusner, board member of the National Association of Credit Services Organizations — which advocates consumer protection and ethical business practices for the credit repair industry — and CEO of Credit Repair Resources for the updated information.

And a big thank you to all my readers for sharing this information via social media.

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