Are Judgments or Tax Liens Hurting your Credit Score?

Judgments and tax liens on your credit report are some of the worst negative items on your credit report. “It’s estimated that each judgment and collection account entry can reduce a FICO score from 15 to 40 points. The severest detrimental effects come from entries that involve public records, such as judgments, and information from an original creditor, such as tradeline information.”[1] “[A]dverse public records, which include [judgments] are considered by the FICO score. Your score can be affected by the mere presence of an adverse public record, whether paid or not.”[2] As for tax liens, these “are considered very negative and can remain on your credit report longer than any other item. Unpaid tax liens remain part of your credit report for 10 years, and paid tax liens remain for seven years, so it definitely is important that you get it removed if it does not belong to you.”[3] While paying off a judgment or tax lien will only have a small incremental increase in your credit score, many creditors will not extend your credit as long as a judgment or tax liens remains unpaid regardless of the judgment’s or tax lien’s effect on your credit score.[4]

Despite the severe consequences of unpaid judgments and tax liens on credit reports and the ill effects on a consumer’s ability to obtain credit, the Credit Reporting Agencies have a demonstrated pattern and practice of failing to update consumer credit reports to reflect that judgements and tax liens have been satisfied and paid. This is a particular problem for Equifax and Trans Union. In fact, both Equifax and Trans Union recently resolved class actions against them in Virginia over this very issue. Equifax paid three million dollars[5] to settle and Trans Union paid over 1.4 million dollars to settle.[6]

False information as to the status of judgments on your credit report could be hurting your credit score and your ability to get credit. If you suspect that this might be happening to you, please call or email  us today for a free credit report analysis and review.

 

 

[1] http://www.bestcredit.com/credit-ratings-advanced-strategies-for-fico-scoring/

[2] http://www.myfico.com/crediteducation/questions/public-records.aspx

[3] http://www.experian.com/blogs/ask-experian/tax-liens-and-credit-scores/

[4]http://www.answers.com/Q/How_many_points_on_your_credit_score_is_paying_off_a_judgment_worth

[5]https://topclassactions.com/lawsuit-settlements/lawsuit-news/256019-equifax-reaches-settlement-in-fcra-class-action-lawsuit/ (“Equifax agreed to a $3 million class action settlement that would resolve claims that the company violated the Fair Credit Reporting Act. As part of the settlement, Equifax will remove any judgments from Virginia state court from its consumer database.”)

[6] https://topclassactions.com/lawsuit-settlements/lawsuit-news/10036-trans-union-reaches-class-action-settlement-inaccurate-credit-reports/ (“Trans Union, LLC has agreed to pay up to $1.4 million to consumers who obtained a credit report with incorrect information that may have impacted their financial options as part of a class action lawsuit settlement.”)