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Credit Bureaus Have Stopped Reporting Tax Liens and Civil Judgments

It’s true—credit bureaus aren’t reporting tax liens and civil judgments. Last year, a new policy was enacted that includes a step to revamp the reporting systems and what the major credit agencies are excluding from reports. Consumer Reports said the big three credit reporting agencies, Equifax, Experian and TransUnion, are beginning to leave out specific information from their credit reports that are related to tax liens and civil judgments.

If complete details are not provided on the information (information including the person’s name, address, Social Security number and birth date), the agencies will remove data regarding tax liens and civil judgments. At least three of those four pieces of information must be there for the information to stay. Also, if records are not updated on a consistent basis, the information will be removed from the credit reports.

This is what it means when credit bureaus have stopped reporting tax liens and civil judgments.

So What Does This Mean?

Though this is an advantage to consumers who may see their credit ratings go up, it is not necessarily a good thing from the lender’s side. It can put lenders, and in turn, borrowers, at risk because the credit reports are no longer a comprehensive picture of the credit history. In terms of how it can hurt lenders? Borrowers can get in too deep and not be able to pay debts.

David H. Stevens, president and CEO of the Mortgage Bankers Association, told the Chicago Tribune that excluding this information will make it hard for creditors to make informed decisions. Without this information, some applicants will see their credit scores go up artificially, and these “false positives” will make them appear a lower risk than they actually are. This can be bad news for lenders.

The increase in scores will mostly be modest, around 10 or 20 points, though some may see score increases of up to 40 points—but this may be enough to make a difference for some people. The problem is, too, that in a study reported by Tim Coyle, senior director of real estate and mortgage for LexisNexis Risk Solutions, it was found that those with tax liens or civil judgments are the ones who present a higher risk when it comes to lending. They are 5.5 times more likely to see default or foreclosure as opposed to borrowers who don’t have this kind of information in their credit history.

However, lenders can still investigate the credit history of a potential borrower. If you are in the position of lending and need a thorough business credit check, you can turn to Credit.net for help. These new policies can make things more complicated, and you want to make sure you are making informed decisions.

Please contact us at Credit.net to see how we can help you make smart business credit decisions. We have over 40 years of experience and can tailor a plan to you. Lending is becoming an ever-more complicated business. Let us do this work for you so you can do what you do best—run your business.

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