Credit Reporting Judgments and Liens Credit Rules

A new day has dawned.  New credit reporting rules kicked in on July 1, 2017 creating drastic judgments and liens credit rules.  From that day forward the reporting of of civil judgments and tax liens has been forbidden.  The presence of judgments or tax liens has always been considered by lenders as highly predictive of default rates by those who have them.  Lenders are howling that lack of lien and judgment data hides the true default risk of certain borrowers.  The presence of a lien or judgment is indicative of 2 X more likelihood of default according to lenders.  Tom Coyle, senior director of financial services and real estate data for Lexis/Nexis claims that consumers with a judgment or tax lien in their profile are 5.5 times more likely to end up in serious default or with a foreclosure.  Eleven per cent or almost 10 million US consumers have either  a lien or a judgment in their credit profile.  Most of these consumers have a lot of other blemishes on their credit reports anyway.

This is no small change in policy.  Industry experts estimate that the new rules have increased credit scores across the board by 10 points on average.  Among the lowest scoring bands, that is consumers with scores of 620 or less,  the average credit score increase is 20 points!

LexisNexis at the Back Door

LexisNexis Risk Solutions is a credit scoring industry powerhouse.  It takes advantage of its lower profile than Equifax, Experian and Transunion while wielding enormous power in the lending industry.  Headquartered in Atlanta, they have a presence in over 100 countries around the world. Judgments and liens new credit rules are a challenge they are not taking lightly.  As a matter of fact you can count on them to see opportunity where others see problems.  They are right on top of the credit reporting judgments and liens credit rules situation.

“Continue to leverage lien and civil judgment data” its web site fairly screams at its lender clients.  LexisNexis brags that they have “supercomputer technology” with 99 % linking capacity as well as a nationwide network of court runners.  They produce for their clients their own “Risk View Liens and Judgments Report.”

Borrowers who don’t see the lien or judgment they know they have on their credit report had better be careful about their sworn mortgage or loan applications.  Lenders are not necessarily limited only to the information on the Big 3 credit reporting agencies reports.  Borrowers who are gambling that their liens and judgments will slide by may get a very uncomfortable surprise when that lender looks up over the glasses perched on the end of his nose and as Dylan says “you stare  into the vacuum of his eyes.”  “Busted” as Ray Charles would say.

Why New Judgments and Liens Credit Rules?

The Credit bureaus have a national trade organization called the Consumer Data Industry Association.  In 2016 a settlement was reached in a lawsuit filed by 31 State attorneys general alleging that there were too many problems with credit reporting accuracy and correction of errors on credit reports.  The settlement requires “enhanced public record data standards for the collection and timely updating of civil judgments and tax liens.”  LexisNexis was not a party to the suit so it is not bound by the terms of the settlement.  Most public record service reports of civil judgments and tax liens cannot meet the stricter standard requiring name, address and social security number or date of birth because they are not updated on a timely basis.

Most civil judgments and at least half of tax liens cannot meet the test for accuracy.  New as well as existing data has been affected.  

These new rules have been widely implemented.  Count on many lenders moving the goal posts by requiring higher credit scores for certain offers.

Medical debt collection claims less than 6 months old will not be reported to give insurance companies time to pay.