Credit Reports Won't Include Tax Liens and Civil Judgements
This Regulatory Change Means a Credit Score Boost for 12 Million Americans
A change in regulations is expected to take effect around the beginning of July at the three credit reporting bureaus. This will likely push the average American's credit score north of 700.
This regulatory change means a credit score boost for millions of Americans
According to the Consumer Data Industry Association, which represents credit reporting bureaus, most tax liens and civil judgments (e.g., a creditor taking a borrower to court over an unpaid debt) will be removed from people's credit scores by roughly July 1. In order for a tax lien or civil judgment to remain on a credit report, it would have to list three data points: a person's name, their address, and either their Social Security number or date of birth. It's uncommon that tax liens or civil judgments contain all three or four of these data points, meaning an expected 12 million people will see these negatives removed from their credit reports. As a result, just under 11 million Americans are expected to see up to a 20-point improvement in their credit score, while around 700,000 Americans could see a 20-to-40-point improvement in their FICO score.
Data from FICO, which was aggregated by Bankrate, the average credit score across America hit an all-time high of 699 in April 2016. The approximate range of a "good" credit score is 700 to 749, putting Americans on the precipice of hitting the "good" credit score mark of 700 for the first time ever. Traditionally, FICO scores are the most popular credit score measure. Ranging from a low of 300 to a high of 850, the higher your score, the more leverage you'll have when negotiating for a loan. Push your credit score into excellent territory (750 and higher) and you'll potentially even have lenders fighting for your business.
Why make the move now, you wonder? It just so happens that the Consumer Financial Protection Bureau released a report earlier this month highlighting a number of shortcomings at the three credit reporting bureaus. One of those deficiencies was a need to improve standards for public-records data by using improved identity-matching criteria.
Long story short, millions of Americans could appear considerably more creditworthy to lenders in the second half of 2017.
The Mortgage Bankers Association (MBA) quantifies the availability of mortgage credit each month with their Mortgage Credit Availability Index (MCAI). According to the MBA, the MCAI is:
" A summary measure which indicates the availability of mortgage credit at a point in time."
The higher the index, the easier it is to get a mortgage. Here is a chart showing the MCAI over the last several months as rates have increased.
Whether you are a current homeowner looking to move to a home that will better serve your family's current needs, or a first-time buyer looking for a starter home, it is easier to get a mortgage today than it has been at any other time in the last ten years.