July 6, 2017
Consumer Credit Expert
Have you ever heard of NCAP (the National Consumer Assistance Plan)? If not, it’s an acronym you should probably learn more about. NCAP is responsible for the introduction of a number of new consumer friendly practices at the 3 major credit reporting agencies – Equifax, TransUnion, and Experian – including the forthcoming removal of a large number of tax liens and judgments from consumer credit reports this month (July 2017).
What Is NCAP?
If you are unfamiliar with the National Consumer Assistance Plan, here is a crash course. Several years ago, the 3 major credit reporting agencies (CRAs) entered into a settlement agreement with 31 state attorneys general and NCAP was born. NCAP brought about some huge credit reporting changes, which were slated to be rolled out over a 3 year period between 2015 and 2018. As mentioned above, the NCAP is the driving force behind the upcoming credit reporting changes which millions of consumers will experience this summer.
Why Certain Public Record Information Is Being Removed from Credit Reports
The NCPA required a multi-bureau “working group” to be set up between the 3 CRAs. This working group was tasked with the job of developing enhanced public record data standards. Most importantly, the group (with representatives from Equifax, TransUnion, and Experian) was responsible for making sure that the public record data, which appears on consumer credit reports, is consistently fair and accurate.
The working group concluded that in order for public record data to be eligible to appear on a credit report the information must contain “a minimum of consumer personal identifying information” (PPI). Moving forward a judgment or a tax lien will not be included on a consumer credit report unless the CRA can verify:
- The consumer’s name, address, and social security number or date of birth
- A minimum frequency of courthouse visits of at least once every 90 days in order to verify the accuracy of the information reported
The vast majority of judgments and about 1/2 of the tax liens appearing on credit reports do not currently meet these standards. Therefore, there is a higher risk of inaccurate public record data appearing on a consumer’s credit reports.
Inaccurate public records on a credit report can potentially drive a consumer’s credit scores downward and can unfairly cause a number of other potential problems for the consumer as well. In an effort to abide by the terms of their settlement agreement the CRAs have chosen to remove all public records which do not currently meet the minimum standards mentioned above. As a result, millions of tax liens and judgments are scheduled to be removed from credit reports this month (July 2017).
Public Records Still Matter
As exciting as the potential removal of negative information from your credit report may be, it’s important to remember that just because a public record is removed from a credit report does not mean that the problem has gone away. If you legitimately owe a tax lien or judgment, then leaving that debt unpaid could still have consequences.
For example, if you owe an outstanding debt to the government your tax refunds could be seized, your bank accounts could be levied, and your wages might even be garnished. Additionally, qualifying for a new mortgage may still prove difficult if you have an unpaid tax lien or judgment, even if that public record has been removed from your credit reports.
The Impact of Removal
The news is not all bad, of course. In fact, the news is great for many consumers who could potentially see a credit score increase as a result of this new policy change being made by the CRAs. Preliminary reports believe that as many as 12 million Americans could potentially see a credit score increase as a result of the removal of a derogatory tax lien or judgment from their credit reports this summer.
According to FICO data (as originally reported by the Wall Street Journal) around 11 million consumers may experience a credit score increase of around 20 points. Another lucky 700,000 consumers may win the credit score lottery and could see a score increase of more than 40 points. While the removal of a single negative item from a credit report (or even multiple negative items) likely will not solve all of your credit score problems, it can certainly be a step in a more positive direction, and every step counts!
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