SAN FRANCISCO (KRON) — Millions of Americans could see a jump in their credit scores when a new law kicks in this weekend.
Two big dings are about to be wiped off credit reports starting Saturday. And the jump in credit scores could be 20 to 40 points, a significant amount for those looking for a loan.
Experian, Equifax, and TransUnion are changing their standards starting on Jul. 1.
The big three credit agencies will wipe out about half of tax liens and almost all civil judgments from credit reports.
“Because they cannot be proven and until they can be proven that they can be correct, off they go,” consumer money expert Erica Sandberg said.
Sandberg tells KRON4 the new law will help about 12 million people get a better credit score.
The law is in response to a class action lawsuit that claimed in many cases, people with the same name, one with good credit and the other with bad, would be mixed up, damaging the good person’s score.
“Because there were just simply too many mistakes, too many consumers said, ‘Hey, I paid it? Hey, that’s not the right balance,’ or, ‘Where did this come from? This isn’t even mine,’” Sandberg said.
A better credit score should make it easier to get loans, credit cards, and mortgages approved.
“You want to have a credit score of about 740-750, so if you are not quite there, this gets you there…you end up with a far better mortgage and you pay less over all, so it makes a big difference,” Sandberg said.
But this could be a law with unintended consequences.
Consumers may appear more creditworthy than they really are to lenders.
“They may just increase interest rates across the board because they take a greater risk,” Sandberg said.
Just because those marks from tax liens or civil judgments do not appear on your credit score after Jul. 1, it does not mean they’ve totally vanished.
You still have to to pay them off.
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