National Credit Reporting Agencies to Remove All Tax Liens from Consumer Credit Reports in April 2018

Written By ESR News Blog Editor Thomas Ahearn

In March 2017, ESR News reported that national credit reporting agencies (NCRAs) Equifax, Experian, and TransUnion had announced the implementation of enhanced standards for the collection and timely updating of public record data included in consumer credit reports as part of the National Consumer Assistance Plan (NCAP) to make credit reports more accurate, transparent, and understandable.

Upon implementing the NCAP enhanced standards for public records, the NCRAs removed all civil judgments and the majority of tax liens from their consumer credit reporting databases in July 2017. The Wall Street Journal (WSJ) now reports that Equifax, Experian, and TransUnion will cease reporting tax lien data and that all tax liens will be removed from consumer credit reports during April 2018.

An estimated 5.5 million tax liens will be removed from consumer credit reports as a result of the new changes, a move that could help millions of consumers because a negative event that may have held them back from being approved for financing will be removed from their credit reports which “could increase their credit score and make them look more creditworthy to lenders,” the WSJ reports.

In February 2018, the Consumer Financial Protection Bureau (CFPB) – the U.S. government agency responsible for consumer protection in the financial sector – released its Quarterly Consumer Credit Trends report that focused on the removal of civil public records from consumer credit reports and explored how the implementation of the NCAP affected the credit records and scores of consumers.

The CFPB report found that all civil judgments and about half of the tax liens on consumer credit records were removed and revealed 6 percent of consumers had a civil judgment or tax lien before the NCAP was implemented, and public records for around 80 percent of these consumers were removed. After the NCAP, 1.4 percent of consumers had a tax lien on their credit report and none had civil judgments.

The CFPB report also found that approximately 4 percent of consumers with civil judgments or tax liens on their credit record in June 2017 – 0.24 percent of consumers overall – experienced a large enough increase in their credit score as the result of the NCAP implementation to move into a higher credit score range. However, the number of reported bankruptcies remained virtually unchanged.

“A tax lien is a lien imposed by law upon a property to secure the payment of taxes. A tax lien may be imposed for delinquent taxes owed on real property or personal property, or as a result of failure to pay income taxes or other taxes,” according to online encyclopedia Wikipedia.com. In the United States, a federal tax lien may be connected with any kind of federal tax such as income tax, gift tax, or estate tax.

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