Credit scores may improve next month

Here is some great news for people who have tax liens or civil judgments on their credit report: Your credit score is probably going up.

The three credit reporting agencies (Experian, TransUnion, and Equifax), on July 1, will adopt new standards for reporting tax liens and public record information. That is to say they won’t be reporting the majority of these public records, although it is unclear what public records will remain.

In any case, this is a huge change because, currently, an unpaid tax lien can drag down a credit score for years. Even after the debt is satisfied, it can stay on the record for seven years.

The credit companies made this decision on their own, without prompting by courts or Congress. But lenders are not that happy about it.

Quoted in the Washington Post, David Stevens, president of the Mortgage Bankers Association said the move will create artificially higher credit scores, making individuals appear lower risk than they are.

According to LexisNexis Risk Solutions, borrowers who have a judgment or tax lien are five and a half times more likely to end up in default or foreclosure.