Tax liens and debts on your credit

Did you know that in 2017, all three credit bureaus implemented changes to eliminate civil judgment records from your credit report? This means debts owed from a lawsuit shouldn’t show up on your credit report anymore.

For example, tax liens or outstanding debt you owe the IRS no longer appear on your credit report, which means these events can no longer impact your credit score. For some this could mean as much as a 30-point bump in their credit rating.

Prior to April 2018, even if you paid off a tax lien, it would stay on your credit report for up to seven years, while unpaid liens remained on your reports for up to 10 years. The updated rules are the result of a Consumer Financial Protection Bureau study that found issues with reporting such information correctly. Turns out a lot of judgments and liens were linked to the wrong people, so someone who shares your first and/or last name even if they lived in a different part of the country could be erroneously linked to your credit file.

You should constantly monitor your credit reports on all three bureaus to make sure the information being reported is accurate. If you don’t already do this, check with your bank or credit card companies to see if they offer this service for free; many do. That way you can keep an eye on your score and detect anything that gets posted to your account that doesn’t belong.