Lenders and credit agencies are only interested in one number: your credit score — the number universally used by creditors to determine the interest rate for a consumer. Any bump to a credit score is most certainly a good thing. And your credit score just might increase this month.
As of April 16, credit agencies TransUnion, Equifax and Experian are excluding tax liens — a legal claim from the IRS that if a real estate owner hasn’t paid property taxes, his property can be repossessed. This type of debt will no longer be a factor in determining credit scores, Forbes reported. But this doesn’t mean that your tax lien has been lifted or forgiven. The IRS still wants that money back.
The update means that credit bureaus will determine a credit score by a different set of criteria. Given the recent omission of tax liens from credit score calculations, scores are based on the number and maturity of credit accounts, balances, timeliness of payments and complement of loans. Creditors favor borrowers with a mix of loans all in good standing.
It’s possible that some consumers will experience a lift in their credit scores — but some might not. Approximately 11 percent of consumers are expected to see a change to their credit reports as a result of the change in credit score calculation criteria, Experian reported, citing data firm LexisNexis. Scores could increase by as much as 30 points overall, Experian reported.
Click to read about 27 things that can mess up your credit score.