by Mindy Leisure
With the changes the credit bureaus (Experian, Trans Union and Equifax) have made first regarding judgments and now tax liens being removed from credit reports, it is important to have a backup to make sure none of these items actually exist.
Just because they are no longer on credit reports does not mean a borrower does not have a judgment or tax lien. Going forward the only public records that will show on credit reports will be bankruptcies. This does not mean that the occasional lien or judgment might show up. There may be some that slip through the cracks. But for the most part all liens and judgments are now being eliminated from credit reports.
A “Liens and Judgments” report can be added on to any credit report. This can be an automatic
add-on to all credit reports or it can be ordered ad-hoc. The report can give the loan officer a heads up if in fact the borrower actually has a lien or judgment that’s not on the credit report. If a lien or judgment suddenly shows up on title this can delay or prohibit closing. Having a report ahead of time could eliminate any possible problems during the loan process. Studies have found that a borrower who has a tax lien on their credit report is more likely to default on a mortgage than borrowers who have no tax liens. Knowing this information up front could be imperative to the loan process.
One of the reasons the bureaus are discontinuing the reporting of liens and judgments is because they felt they didn’t have the resources to accurately acquire the information. Now, there are independent companies that provide this information that have access to over 3000 counties, boroughs and parishes in the United States which encompasses 98% of the population.
Because this report is an add-on to the credit report any liens or judgments are not factored into the credit scores. The borrower now may have scores higher than they really should. A tax lien can have a significant negative impact on credit scores. If the lien were still on the credit report the borrower would likely have scores 30-50 points lower than they would without the lien.
The Liens and Judgments report also cannot be altered or corrected in the way a credit report can through supplements or a rescore. It is simply an add-on to the credit report to be used for underwriting purposes. The report is FCRA compliant.
Since judgments and now liens are to be removed from credit reports what if a borrower does find they still have one showing on their report? They should dispute it with whichever credit bureau is still showing the lien. This can easily be done by going through www.annualcreditreport.com. The borrower just needs to be careful of timing when disputing any item on their report as this will temporarily put a dispute remark on the item on the credit report which could also hold up the loan process.
The information provided in this additional report could have an enormous impact on whether or not a loan closes. And since it can be ordered early on in the loan process it would help eliminate any unwanted surprises that might show up on title. A little foresight and planning can go a long way in this case.
