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.
If you have a tax lien or civil judgment that does not contain the proper and correct identifiers, then Equifax, Experian, and TransUnion will remove it from your credit report this month, beginning July 10th. The identifiers are name, address, and either social security number or date of birth.
There is no need to send a letter requesting the deletions. If your lien or judgment does not include the identifiers, the account will be removed. It doesn’t matter if it is paid or has a balance. This is about proper identification, not about money owed. The expectation is that about 50% to 60% of tax liens will be deleted, and about 95% of civil judgments will be deleted.
If you are fortunate to have one of these derogatory accounts removed, you should see your credit score go up. This, in turn, could qualify you for a better interest rate or a better loan program when borrowing money or getting a mortgage.
How Much Will Your Credit Score Increase?
How many credit points you might gain depends on the rest of your credit report. If you have a clean report with one lien that gets removed, you could see an improvement of 40 to 50 points, which would make a significant difference. On the other hand, if your report is scattered with late payments and collections, your score will probably increase by only 10 points or so.
Getting the Credit Deletion Does Not Mean You Don’t Still Owe Money
Let’s say you hired a contractor to replace your roof, then due to hardship, you did not pay. The contractor then filed a civil judgment that went on your credit report. This judgment contains your name and address, but is missing your social security number and date of birth. This judgment will be removed from your credit report, but that doesn’t mean you don’t still owe the contractor for the work he performed. This is not a license to steal from the contractor. What’s more, the next time a title report is pulled, this lien is going to show up, so when you sell the home or refinance, this lien must be paid.
If you owe on back taxes, you can expect that to stick like glue to your social security number, even if it gets removed from your report for not having your address.
Checking On Your Credit
To find out if your lien or judgment was removed, order your free annual credit report by mail from http://www.annualcreditreport.com. Don’t be lazy and order online for the many, important reasons stated in Repair Your Credit Like the Pros. Or, you can call 877-322-8228.
Please share this information via social media, because it affects a lot of people. Thank you.
The Fair Credit Reporting Act includes Statutes of Limitations on how long negative credit can remain on your credit report. Here is a quick list for your reference.
Late Payments: 7 years from the late payment date
Collections, Charge-Offs: A late account becomes a collection or charge-off after it is 180 days past due. It must be removed 7 years after the last date of delinquency.
Chapter 7 Bankruptcy: 10 years from the file date.
Chapter 13 Bankruptcy: 7 years after the file date.
Judgments: These are more complex. They have a Statute of Limitations of 7 years; however, they may be revived at any time by the judgment holder, making them last indefinitely until paid.
Unpaid Tax Lien: Forever, no Statute of Limitations.
Paid Tax Lien: 7 years from the date of release.
Word of Advice: File the release with your courthouse so the 7-year clock starts.
Hot Tip: If an IRS tax lien is less than $25,000 and paid, you can use IRS Form 12277 to have it removed within 90 days.
Heartfelt thanks to Chad Kusner, President of Credit Repair Resources LLC, for this information.
Are you curious about how credit repair specialists and certified credit attorneys legally delete bad credit?
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