Credit scores could increase for some this week

Equifax photo
The major credit bureaus like Equifax, Experian and TransUnion will no longer report some civil judgment data and tax lien data. File Photo by Justin Lane/EPA-EFE

By Danielle Haynes 

April 16 (UPI) — Some credit scores may increase this week after new rules go into effect Monday about how U.S. credit bureaus can report tax liens.

The major bureaus — Equifax, Experian and TransUnion — will no longer factor in nearly all civil judgment data and about half of all tax lien data. This includes unpaid money owed as the result of a civil lawsuit and unpaid taxes.

About 11 percent of people will see their credit scores increase, and some credit scores could go up by up to 30 points as a result of the new rules, LexisNexis Risk Solutions predicted.

In its report, the CFPB found that if public records for judgments or liens were removed from credit reports, 75 percent of consumers were relatively unaffected, 17 percent bumped up to a higher credit score band, 6 percent moved to a prime band or higher and 66 percent remained subprime or deep subprime.

The changes came about as a result of a report by the Consumer Financial Protection Bureau, which determined there were problems with how credit bureaus report credit scores. The report prompted credit bureaus in July to go ahead and remove some civil judgment data and tax lien data.

Though this may be good news for some consumers, it could have an unintended consequence.

Nick Larson, a business development manager for the financial services unit of LexisNexis, told CNBC that if banks are unable to differentiate between risky and non-risky borrowers because of this leveling of the playing field, “lenders and services have to hedge for that risk.” This means they could charge higher interest rates for everyone.

“Overall, consumers actually get hurt,” he said.

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