In our previous article, we had discussed about the scrapping of tax liens in our personal credit reports.
This new policy is a big boost to millions of Americans, especially small business owners who need stronger credit to apply for a business loan. After just two weeks of implementation, Terra International Realty learned that the three major credit bureaus were able to delete the last remaining remnants of tax lien data on consumer reports at 5.5 million records.
However some sector believes that the removal of tax lien will affect a person’s credibility and ability to pay a debt. Apprehensions are ripe on a lenders willingness to extend loans without any records to back up a borrower’s credit background.
A senior director of credit risk assessment at LexisNexis Risk Solutions, a provider of public record data said that it is important for lenders to know, for example, if a consumer has a $50,000 tax lien that they have an obligation to repay before issuing them new credit. He further said, that it is important for the lender to be aware that the consumer also has another obligation to pay, as this will affect his capacity to pay all obligations.
Terra International Realty also found out, based on a report by the Consumer Financial Protection Bureau the different opinions and judgments on the removal of tax liens on public records data:
- 75% say they remained in the same score band
- 17% moved to a higher score band
- 6% rose to near prime or top prime (good to excellent credit score)
- 66% stayed subprime or deep subprime (average or below average score)
After July 16, the only public records that will remain in consumers‘ files will be bankruptcies, which will come with sufficient public information. However, we cannot exactly tell how deleting these records will affect consumers’ credit scores and their ability to get credit.
The Consumer Financial Protection Bureau observed a very minimal impact on the credit scores of some consumers as it neither improve nor lessen their credit score. They concluded that removing tax liens from credit files will have very little impact on credit scores for people that have good credit. But if you are struggling with credit and have a week credit file, this will help you. The consumer who has a tax lien is now automatically having a negative entry removed from their credit file.
