FICO scores are the credit scores most lenders use to determine your credit risk. You have FICO scores from each of the three main credit bureaus, Experian, Equifax and TransUnion and also some lesser known ones. Each score is based on information the credit bureau keeps on file about you and that is expected to change soon.
Fortune reports that all three main credit bureaus are going to remove tax liens and civil judgments from credit reports. This move should result on higher credit scores for some people. The change will be made around July of this year, but it won’t apply to all liens and judgments.
Tax liens and judgments will only be erased if they don’t contain all of the following information: a name, an address, and either a date of birth or a social security number. Many liens and judgments don’t contain all three pieces of required data, so this change should apply to many of them. This means that many people will have a higher FICO scores and will be regarded as more creditworthy based on their credit reports from the three main credit bureaus.
FICO estimates that those who will be affected will see their credit scores jump an average of about 20. This should affect around 11 million people.
This change is a result of regulatory concerns. Since 2015, the three credit-reporting firms have reached settlements with more than 30 states over practices including handling of errors. Since then, some information unrelated to loans, like gym memberships and traffic tickets, have been struck off credit reports. The Journal reports that, in 2011 alone, 8 million complaints about wrong information in credit reports were received by the three major credit-reporting firms.
FICO credit scores are very important as they’re needed to buy a house, get a loan, or get approved for credit cards. They also give you a better chance at renting an apartment and getting a job. Federal law entitles you to request a free report from each bureau once every 12 months, so you should always check your credit reports for any discrepancies. You can file a dispute if you see anything that’s not supposed to be in there and is hurting your score.
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If millions have their FICO score increased, a FICO score won’t be worth what once it was. Kind of like grade inflation, where kids at some schools can now graduate with 4.5 GPAs. Straight-A students can be below average, and pretty soon a 740 score might mean you’ll only qualify for a secured credit card.