How the New Reporting Standards Can Improve Your Credit Score
You may see an increase in your credit score soon. The Consumer Financial Protection Bureau (CFPB) reported that incorrect information on a credit report serves as the top complaint among consumers. As such, the government has issued new standards for credit reporting.
The credit score change will most likely affect only those who have tax liens. Abajian Law, a legal office specializing in tax cases, explains that a sudden lien is a devastating event. It could come with consequences that go beyond impacting a credit score.
The recent improvement to the standard on credit reporting, however, could provide some relief. This is especially when you plan to take out a loan.
Credit Score, Tax Liens, and Their Roles in the Credit Score Change
Credit score, derived from data in your credit history, refers to the numerical expression of your creditworthiness. If your credit score bumps up, you’re more likely to receive an approval for a substantial loan.
Tax liens, meanwhile, refer to any authorized lien against any asset of a taxpayer with back taxes unpaid. It’s through this that the Internal Revenue Service (IRS) secures or gets a hold of your property to secure the payment.
The rise in credit scores serves as an effect of the removal of tax liens in credit reporting. In the new standards, the three major credit reporting companies — Equifax, Experian, and TransUnion — stripped out tax liens from credit reporting.
Expect credit scores to go higher as much as 30 points as some tax liens and civil debts disappear from credit reports.
Improved Standards for Credit Reporting
If your credit score is over 760, you have an excellent one. But for those with credit scores below 700, it takes a toll on the process of paying for credit cards, mortgages, and car loans.
The CFPB’s report indicated that consumers want reforms that will help them improve the accuracy of their credit reports. Due to the insufficient quality control systems of the largest credit reporting companies, new updates came about to resolve this issue.
In July last year, the credit reporting companies removed almost 50 percent of tax lien information from credit reports. On April 16, the rest of the changes from the new standards took effect.
The Effects on Consumers
These updates on credit reporting standards could provide better opportunities for you. If your credit score goes up, you could find it easier to apply for a home loan or a car loan.
The new standard does mean good news for your credit profile, with the removal of the tax lien or civil judgment. But if you still owe the IRS money, it is crucial to keep track of this issue and get professional guidance. Vic Abajian, an experienced IRS tax attorney, shares that an advocate can present your case and help you get relief from any levy or lien.
Building up an excellent standard credit score can be a lot of hard work. It involves discipline and greater knowledge of your finances. Monitor your financial health, double-check your credit score – that way, you are adequately prepared for your future.