A major change in credit reporting practices took effect on July 1st, 2017, and it may be the key that opens the door for many first-time homebuyers. The three major credit bureaus—Equifax, Experian, and TransUnion—have implemented new standards that significantly alter how public records impact your creditworthiness.
What Is Changing?
Under these new guidelines, the bureaus will no longer collect or report a substantial amount of data regarding civil judgments and tax liens. Specifically, if these public records do not include a person’s name, address, and either a Social Security number or date of birth, they will be stripped from credit reports entirely.
Why the Change?
This shift comes after years of concerns regarding the accuracy of public record data. In many cases, consumers were being denied home loans based on "false positives" or inaccurate reporting of liens and judgments that didn't actually belong to them. By removing this unreliable data, many consumers who previously fell short of the minimum credit score requirements for a mortgage may now find themselves eligible.
The Industry Debate
While this is a win for many potential buyers, the banking industry has expressed some caution. Lenders are concerned that by having less data available, it may become more difficult to fully evaluate an applicant's risk.
The Balancing Act:
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For the Consumer: Protects against false denials and provides a more accurate reflection of current financial habits.
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For the Bank: Banks must find new ways to ensure they are protecting their investors while still being fair to applicants.
What This Means for You
If you were previously told your credit score was too low due to a past judgment or a resolved tax lien, it is time to check your report again. This 2017 policy change could be the boost you need to secure a mortgage and start your home-buying journey in Columbia County.
