Imagine if you could snap your fingers to make your credit score leap by nearly 40 points. Well, come July, this may become a reality due to some recent credit score changes.
This credit score change is the result of a policy update due to class action lawsuits in 31 states naming attorneys general as defendants. The suit revealed credit reporting inaccuracies, misappropriated data and reduced credit scores from civil judgments and tax lien data on consumers.
In the “inaccuracies” part, the suit alleged a “mislinking” of data, which is when someone else’s tax lien or civil judgment information mistakenly shows on your credit report – resulting in improper credit score reductions.
You may also have been impacted if you’ve ever had to deal with a civil judgment (a court-ordered payment in a settlement case) or a tax lien (a government-imposed legal claim on one’s assets for not paying taxes).
Having either a civil judgment or a tax lien listed on your credit report could negatively impact your credit score.
The data has led to, what plaintiff’s claim, unfair credit score deductions.
The Good News!
On July 1, the big three credit bureaus will remove most civil judgments and about half of tax liens in your files – if they exist.
Experian, Equifax, and TransUnion will be required to sift through the data and remove any bad data that lacks adequate confirmation (e.g., SSN and birthdate) that it applies to that particular consumer. Basically, if they can’t prove with certainty that the derogatory marks on your credit report due indeed belong to you, they’ll have to remove them and adjust your score accordingly.
Under this new policy, other data that’s retained must be reverified every six months, which is part of the Consumer Financial Protection Bureau’s National Consumer Assistance Plan.
However, only a small portion of consumers affected by this change will see a large 40 point jump; most will see an increase of 10-20 points.
Think you may be affected by these upcoming credit score changes?
- Get your credit scores as soon as possible
- Check if you have any tax liens or civil judgments
- Pull your credit report a second time in at least mid August and compare (the change, if any, may take a few weeks to show)
- Do not let a credit jump deceive you into thinking your slate has been wiped clean. You are still accountable for any existing judgements if they’ve been confirmed to apply to you. You must investigate these
- Not resolving those judgments can result in serious consequences
And remember, you should be checking your credit report at least every 6 months, simply to make sure that there aren’t any new unauthorized accounts or other suspicious activity being reported.