Beginning July 1, 2017, the three major credit reporting agencies (Equifax, Experion, and Transunion) will no longer include negative information regarding civil judgments or tax liens on consumer credit reports if the judgment or tax lien at issue is incomplete. Judgments and tax liens will be deemed incomplete if they do not contain all of the following:
- The consumer’s name;
- The consumer’s address; and
- The consumer’s Social Security number or date of birth.
Very few Michigan civil judgments include a consumer’s Social Security number or date of birth, and are therefore likely to be omitted from consumer credit reports. These liens and judgments will still exist, but their omission from credit reports will make credit reports less reliable.
Moreover, even if all of the required information is present, credit agencies are required to update judgment/lien information every 90 days. If these updates are not completed, information about the lien or judgment will be removed from credit reports.
This change is good for many consumers who will see their FICO scores rise because, on average, the removal of a lien or civil judgment from a credit file causes an increase of 10 points on a credit score. However, the change is bad for lenders and landlords, as Lexis/Nexis Risk Solutions reports that such consumers are twice as likely to default on payments.
Lenders and landlords who use credit reports to make lending decisions or in reviewing tenant applications need to be aware of this change and consider other alternatives to obtain information about liens and civil judgments.
Contact us today to learn more about this coming change and how you can prepare for it.