ADVERTISEMENT

Will removal of civil judgments boost my credit score?

New credit reporting practices starting July 1 may ... or may not ... affect your score

By

Speaking of Credit
Speaking of Credit columnist Barry Paperno
Barry Paperno is a freelance writer and credit scoring expert with decades of consumer credit industry experience, serving as consumer affairs manager for FICO (formerly Fair Isaac Corp.) and consumer operations manager for Experian. He writes "Speaking of Credit," a weekly reader Q&A column about credit scoring and rebuilding credit, for CreditCards.com. His writings about credit scoring have appeared in The Huffington Post, MSN Money, CBS Money Watch and other consumer finance websites.
Ask a question.
'Speaking of Credit' archive

Question

Dear Speaking of Credit
I have a 5-year-old civil judgment for an unpaid credit card debt on my credit report. I recently read about a new law that will force the credit bureaus to remove judgments and tax liens from credit reports. Is this true? And if so, how much will my credit score benefit from that judgment being gone? – Jake

Answer

Dear Jake,
Yes, some new credit reporting practices on the horizon could affect your credit reports and scores. Most notably, beginning July 1, 2017, and arising largely from the 2015 National Consumer Assistance Plan, the big three national credit bureaus – Equifax, Experian and TransUnion – will only be allowed to add tax liens and civil judgments to your credit report if they include a name, an address and either a date of birth or Social Security number.

These latter two identifiers often never make their way to civil judgments and tax liens in a county public record file that also includes bankruptcies. As a result, many such records are likely to be removed from consumer credit reports over the next few months.

“The enhanced standards ... will have an impact on consumer reporting databases – particularly with civil judgment data where a vast majority of data may not meet PII (personally identifying information) requirements,” the Consumer Data Industry Association says. The organization sets many of the credit reporting procedures affecting credit bureaus and data providers. “With respect to tax lien data, approximately half of this data may not meet the PII requirements.”

Change may boost some credit scores
This credit reporting change could increase your score, as the odds of your judgment being removed for lack of personally identifying information appear to be pretty good. Yet it’s certainly no slam dunk, considering that the bank obtaining the judgment against you was likely to have possessed both your date of birth and Social Security number when filing suit – and therefore had the ability to meet these new reporting requirements. 

In order for this new credit reporting rule to truly help your score, two events have to happen.

  • Your judgment must have been filed without either a date of birth or Social Security number. It seems there is a good chance that this is the case with your judgment.
  • Your judgment must be having a negative impact on your score, so your score likely would rise if this judgment is removed from your credit report.

Unfortunately, neither condition will be readily visible on your credit report beforehand, since credit reports don’t necessarily show all of the identifying information accompanying a public record item or point out which particular items are affecting the credit score.

How a judgment removal could affect your credit score
How is your score likely to be affected if your judgment is eliminated from your credit report? 

For now, let’s assume the judgment will be removed so we can briefly address a couple of ways by which your credit score might be affected. 

  • The removal of the judgment might not make any difference to your score, if it is not lowering your score currently. While it may be surprising that a “derogatory” item isn’t hurting your score, this is common when there are multiple public record items on the credit report and the one being removed is not the most recent. Why? When the scoring formula weighs the effects of public record items, the most important factor tends to be the length of time since it – or the latest of multiple items – was filed. While the frequency of public records and their severity can also influence your score, especially when a bankruptcy is filed, for the most part, with multiple public records, only the most recent item is likely to be damaging your credit score.
  • Your credit score might get a boost if your civil judgment is removed and it is currently the lone public record or the most recent among multiple public records on your credit report.

Obviously, if your judgment remains, it’s likely to continue impacting your score in much the same way as it has been until now. Hopefully, your credit score has already been rising with the passage of time, your card balances under control and the absence of new negative information.

Only time will tell what these changes will mean for you and your credit score. After July 1, allow about 30-60 days for any changes to take effect before checking your credit reports. However, even if you’re fortunate enough to finally say goodbye to that judgment (from your credit report, though not from the public record), don’t assume that removing a negative item will always help your score.

What can’t be answered, of course, is just how much of a score increase you can expect if your judgment is removed from your credit report. Such predictions remain virtually impossible due to the many factors affecting a credit score at any given time. Here’s hoping July 1, 2017, is your lucky day!

See related: Credit bureaus tighten reporting rules: Who wins, who loses?, 10 surefire tips to get errors off your credit reports

Meet CreditCards.com's reader Q&A experts

Does a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.

 

 

Published: April 20, 2017

ADVERTISEMENT
ADVERTISEMENT

Join the discussion
We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.




Updated: 04-30-2017

ADVERTISEMENT


Weekly newsletter
Get the latest news, advice, articles and tips delivered to your inbox. It's FREE.


ADVERTISEMENT