Unclean Hands: FICO to Exclude Certain Negative Information Boosting The Pool of Eligible ‘Credit-Worthy’ Mortgage Recipients
“It’s going to make someone who has poor credit look better than they should,” said John Ulzheimer, a credit specialist and former manager at Experian and credit-score creator FICO. “Just because the lien or judgment information has been removed and someone’s score has improved doesn’t mean they’ll magically become a better credit risk.”
Many tax liens and civil judgments soon will be taken off people’s credit reports, the latest move to omit negative information from the powerful financial scorecards.
The decision by the three major credit-reporting firms—Equifax Inc., Experian PLC and TransUnion—could help boost credit scores for millions of U.S. consumers, but could pose risks for lenders. The reports and scores often help decide how much consumers can borrow for a new house or car as well as determine their credit-card spending limit.
The unusual move by the influential firms comes partially in response to regulatory concerns. The three reporting bureaus rarely tinker with the information that goes on credit reports and that lenders consult to gauge consumers’ ability and willingness to pay back debts.
Equifax, Experian and TransUnion recently decided to remove tax-lien and civil-judgment data starting around July 1, according to the Consumer Data Industry Association, a trade group that represents them. The firms will do so if those data don’t include a complete list of at least three data points: a person’s name, address and either a social security number or date of birth.
Many liens and most judgments don’t include all three or four. This change will apply to new tax-lien and civil-judgment data that are added to credit reports as well as existing data on the reports.
The result will make many people who have these types of credit-report blemishes look more creditworthy.