Your FICO score is one of the most important numbers when it comes to your finances. Whether you’re buying a home, a car or applying for a credit card – lenders want to know the risk they’re taking by lending you money. FICO Scores are the credit scores used by 90% of top lenders to determine your credit risk. Your FICO Scores (you have FICO Scores for each of the 3 major bureaus) can affect how much money a lender will lend you and at what terms (read more here). Each score is based on information the credit bureau keeps on file about you and that is expected to change soon.
Fortune reports that all three major credit bureaus are going to remove tax liens and civil judgments from credit reports. This should result in higher credit scores for some people. The change will be made around July 2017, but it won’t apply to all liens and judgments.
Tax liens and judgments will only be erased if they don’t contain complete information. If they don’t have your name, an address, and either a date of birth or a social security number, they will be removed. Many liens and judgments don’t contain all three pieces of required data, so this change should apply to many of them. This means that many people will have a higher FICO scores and will be regarded as more creditworthy.
FICO estimates that those who will be affected will see their credit scores jump an average of about 20. This should affect around 11 million people.
This change is a result of regulatory concerns. Since 2015, the three credit-reporting firms have reached settlements with more than 30 states over practices including handling of errors. Since then, some information unrelated to loans, like gym memberships and traffic tickets, have been struck off credit reports. The Journal reports that, in 2011 alone, 8 million complaints about wrong information in credit reports were received by the three major credit-reporting firms.
Your credit score is important. Knowing your credit score and regularly checking your credit report, is the first step to a healthier score. A good score is needed to buy a house, get a loan, or get approved for credit cards. They are also frequently required to rent an apartment or applying for a job.
Federal law entitles you to request a free report from each bureau once every 12 months. Check your detailed credit history and look at negative items, such as late payments and dispute any errors that you see or even items that you’re not sure about. The credit bureau will contact the other party and if it’s an error or they do not answer in a timely manner, they will remove the negative item from your credit history.