Beginning this month, the three major credit bureaus—Equifax, Experian, and TransUnion will start removing tax liens and judgments from credit reports, making it easier for them to qualify for mortgages and other loans.
The action is part of the National Consumer Assistance Plan (NCAP) initiative. The NCAP was created in March 2015 when it became apparent that widespread errors on credit reports were severely affecting Americans’ credit scores, and in some cases preventing them from qualifying for loans such as mortgages.
The New Standards for Credit Reports:
-If entries do not meet a minimum threshold of information, they will be completely removed. Entries must include name, date of birth, social security number, and address.
-Judgments will be checked every 90 days or they will be removed.
Here are FICO’s estimates regarding the impact the changes will make:
-300,000 consumers can expect credit scores to increase 60 points or more
-700,000 consumers can expect credit scores to increase 40 points or more
-One to two million consumers can expect credit scores to increase between 20 to 39 points
-The majority of consumers will only see an increase in their credit score of one to 19 points
More Mortgages Anticipated
As a result of this major decision, it is anticipated that more people will begin to qualify for new mortgages and refinance loans for two reasons. First of all, as their credit reports are wiped of damaging tax liens and judgments, the credit scores of those affected will rise. And secondly, the removal of the dollar amounts of the judgments and tax liens from the total debt on their credit reports will improve their debt-to-income ratios.
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