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This report is from Yahoo’s finance section. We wanted to pass the information along to you. You can find out more by clicking here.
The major credit reporting agencies have a big change in the works that could bolster a lot of people’s credit scores.
As part of its National Consumer Assistance Plan (the result of a settlement brokered with 31 state attorneys general back in 2015), Equifax, Experian and TransUnion are planning to significantly reduce the amount of tax-lien and civil-judgment information found in consumer credit files.Details have yet to be finalized, but “there will be less of that type of data in credit reports moving forward,” Stuart K. Pratt, president and CEO of the Consumer Data Industry Association, a trade association that represents the credit bureaus, confirmed to Testing is currently underway and a final plan regarding the information is expected to be implemented in July 2017.

A ‘Meaningful’ Impact

A new study from major credit scoring model VantageScore recently found that the move could help a number of people improve their credit. The study assumed the most extreme form these changes could take – eliminating all civil judgments and tax-lien data from credit reports – and examined the impact it would have on the VantageScore 3.0 scores for 4 million U.S. consumers.
Under these parameters, Vantage found 11% of the sample population had tax liens or civil judgments removed. Approximately 8% of the sample received an average score increase of 11 points when all tax liens and civil judgments were removed.That may seem like a small amount of consumers. But “the sample is intended to be representative of the U.S. population,” Sarah Davies, VantageScore’s senior vice president of analytics, product management and research, explained. “The idea that 11% of consumers have some kind of public record [on their credit report], that’s quite a lot of consumers.”
Not to mention, in certain instances, score increases could be more substantial. VantageScore found, for instance, that 33.6% of consumers with scores between 581 and 600 saw their scores increase to between 601 and 620 when the lien and judgment data was removed. And 33.1% of consumers with a score between 601 and 620 saw their score bump up into the 620-to-641 range.
Those changes are noteworthy, given that, in both scenarios, these consumers could find themselves newly able to secure a mortgage. Federal Housing Administration-backed and U.S. Department of Veterans Affairs-backed loans generally require a minimum credit score of 580. And most mortgage experts say conventional loans (one not backed by a government agency) generally require a minimum score of 620.Davies explained that the average score increase is on the lower side because many consumers with liens or judgments on their credit reports have other negative information weighing them down. But “for some people, [the change in score is] going to be meaningful,” she said.

More Consumer-Friendly Credit Reports

The reduction of tax lien and judgment data isn’t the only change in the works as a result of the 2015 settlement. As part of its National Consumer Assistance Plan, the credit bureaus are also working to overhaul their dispute process by, among other things, employing specially trained personnel to review disputes and supporting documentation; allowing consumers who discover an error after obtaining their credit reports through to get a second report free of charge; and providing additional information with the dispute results, including a description of what a consumer can do if they’e not satisfied with the outcome.
They also plan to introduce a 180-day waiting period between the time a medical bill account is created and the time it can be recorded on a credit report as due for collection, as well as forming a multi-company working group to regularly review and help ensure consistency in reported data.
But the tax lien and judgment reduction – related to the bu
reaus’ promise to eliminate the reporting of debts that did not arise from a contract or agreement by the consumer to pay, like tickets or fines – is significant in that it represents the full removal of certain information that has long appeared on credit reports.

Getting Healthier Credit

The bureaus were given 3 years to implement the new policies outlined in the agreement. And major changes made by big credit scoring models – including the exclusion of paid medical debt in their calculations – only apply to the latest versions of their scores, which have yet to be adopted by all lenders.

ID Watch: An Exclusive Service Through CIC Credit

When the IRS rejects a consumer, the applicant, and joint applicant are provided access to a professional Identity Recovery Advocate, who will perform an investigation to determine the extent of the problem and remediate fraudulent activity working under a Limited Power of Attorney authorization.
The Identity Advocate will contact the IRS Identity Theft Protection Security Unit on behalf of the victim and also work to expunge any wrongful records created by the fraud that may impact the consumer’s tax records, credit score or reputation in the future. The Identity Advocate manages the remediation process on behalf of the victim to resolve all types of IRS fraud, financial and non-financial identity theft issues – at no cost, no matter how long it takes. Once the identity theft issues are resolved, the IRS will remove the Fraud Flag. However, the mortgage underwriter will have to order another 4506-T Form to finalize documentation.

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