JACKSONVILLE, Fla. – Earlier this month, the Wall Street Journal reported that all three major U.S. personal credit monitoring firms will be making a change in the information they use to determine individual credit scores and some consumers may see a change on their credit report as a result.
Around July 1, all three credit reporting firms Equifax, Experian and TransUnion, will remove tax-lien and civil-judgment data from credit reports. However, to be removed, those tax liens or civil judgments will need to be incomplete because they’re missing a person’s name, address, Social Security number or date of birth
These changes will affect existing tax lien and civil judgments, and new ones.
What impact will this change have? Approximately 11 to 12 million consumers will see a slight increase in their credit score, typically about 20 points, once this change is implemented. Consumers who are affected by this change will see a short-term improvement.
Mary Svoboda, the chief operating officer of Jax Federal Credit Union suggested four steps for individuals to be proactive about their credit.
Consumers can visit AnnualCreditReport.com to access a full credit report. Consumers are entitled to one full, free report per year from each of the three reporting agencies, TransUnion, Experian and Equifax.
Second, Svoboda suggested that consumers reviewing their report ensure there are no inaccuracies. The Consumer Financial Protection Bureau announced earlier this month that it is taking steps to make it easier for consumers to fix inaccurate data by filing a dispute. If consumers see a derogatory mark for a debt that they have already paid, or an item in collections that they don’t recognize, the next step is to file a dispute.
"On an auto loan, you might save around $1,400 (with an improved credit score)," Svoboda said. "Don't just stick your head in the sand and ignore it. Your credit score is very, very important."
Third, Svoboda recommended that individuals monitor their credit. Consumers can always monitor their credit score for free through services like CreditKarma. Factors like age of credit and credit utilization will affect a score over time; by reducing debt and making on-time payments, consumers can improve their score.
"They should spread that out and get it throughout the year, " Svoboda said. "That way they can be constantly monitoring what's on their credit report."
Finally, set fraud alerts. Requesting a fraud alert to be placed on an individuals credit report at AnnualCreditReport.com requires a consumer to verify anyone who is accessing his report for 90 days. This tool can help reduce the risk of identity theft.