Starting in April, the three major credit reporting agencies will remove tax liens from all consumer credit reports, which could mean a boost in scores for some consumers. TransUnion®, Experian® and Equifax® are taking this step because of gaps in the information they receive on tax liens. The exclusion of tax liens will enable them to comply with enhanced credit reporting standards and resolve pending litigation.
“All tax liens will be removed from consumer credit reports the week of April 16, 2018,” TransUnion said in a press release. “We are advised that Experian and Equifax have also decided to cease reporting tax lien data and will take similar action in April 2018.”
The announcement comes as welcome news for Americans still plagued by tax lien information, which can have a damaging impact on credit scores if listed on their credit reports.
In July 2017, a change in credit reporting rules caused the three credit bureaus to exclude an estimated 96 percent of civil judgments and 60 percent of tax liens from credit reports, which was a credit score windfall for roughly 12 million consumers.
Companies, also called data furnishers, supplying information on civil judgments or tax liens to the credit bureaus must include at least three items of personally identifying information: (1) name, (2) address and (3) social security number and/or date of birth. If that information is incomplete, the civil judgment or tax lien cannot be included on credit reports. Furthermore, information currently on credit reports must be removed.
LexisNexis said in June 2017 that approximately 11 percent of U.S. consumers have a tax lien or civil judgment on file. A consumer who has a lien or civil judgment removed from their credit file experiences an average credit score increase of 10 points.
In a study released in February, the Consumer Financial Protection Bureau said around 17 percent of consumers who had liens or judgments last June moved from a lower score to a higher score, but the report cautioned that the data are insufficient to evaluate the extent the removal of these public records would have on credit scoring models.
No matter how the numbers shake out, consumers with a tax lien weighing heavily on their credit file should check their scores and pull their reports from TransUnion, Equifax and Experian to review the impact on their scores.