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If you’ve ever looked at your credit report, you’ve probably noticed a section called “public records.” These are entries that are also on file with local, county, state or federal courts. Keep reading to learn more about which public records appear on credit reports.
What Are Public Records?
Public records are documents or pieces of information that are not considered confidential. Some examples include arrest records, marriage certificates and some court records. These are records that other people or entities could look up about you, as the information isn’t private or protected.
In the context of your credit report, historically, only three types of entries were public records: tax liens, civil judgments and bankruptcies. Now, only bankruptcies should show up as a public record on an individual’s credit report.
The Public Record Entries
First, it’s essential to understand the three types of public record entries that can impact your credit report.
A tax lien is a law-imposed lien upon property for the payment of taxes. Typically, a tax lien occurs when a person fails to pay taxes owed on property (personal and other), income taxes or other forms of taxes.
A civil judgment is a legal ruling against a defendant in a court of law. It refers to a judgment on a noncriminal legal matter and often requires the defendant to pay monetary damages.
Bankruptcy is a legal process in which people or other entities who cannot repay debts to creditors try to seek relief from some or all of their debts. In most jurisdictions, bankruptcy is usually imposed by a court and is often initiated by the debtor.
Understanding the Updated Public Record Policy
In 2017, the National Consumer Assistance Plan (NCAP) went into effect and changed how data is collected for civil judgments and tax liens before these entries appear as public records on credit reports. The act was initially launched in 2015 by the three major credit bureaus to modify credit reporting rules and set stricter standards. These new standards would ensure that the data found on credit reports are more accurate and up to date.
There are two primary ways this act affects how credit bureaus obtain and report tax lien and court judgment data on consumer credit reports. First, for either of these types of entries to appear on a credit report, the public record must contain a person’s:
- Name
- Address
- Social Security number or date of birth
This standard applies to both new and existing records that are already on credit reports.
Secondly, public records reported on credit reports must be checked by the credit bureaus for updates every 90 days to ensure their accuracy. If the records are not checked, they should be removed from the credit report.
Bankruptcy records already hold these strict requirements, which is why the changes don’t impact this type of public record. However, many tax liens and civil judgments do not uphold these standards, in large part due to different standards of record-keeping at various courthouses.
This higher standard for public records is estimated to have positively impacted millions of US consumers. As this change applies to public records that were already on credit reports before the NCAP, it’s essential to review your personal credit reports to see if any public records are still being shown. Generally, tax liens and civil judgments shouldn’t be on your credit reports anymore.
By 2017, almost half of all tax liens and civil judgments were removed from consumer credit reports, and by April 2018, the three credit bureaus had removed all tax liens from credit reports. Currently, the only type of public record that should be present on your credit report is a bankruptcy.
Not a Permanent Change
It’s crucial to note that tax liens and civil judgments might not stay off credit reports forever. This is because reporting on them isn’t illegal and the credit bureaus only promised to remove them for a time. This could change sometime in the future, so you still want to avoid incurring these types of public records if possible.
How Do Public Records Affect Your Credit?
Typically, when a public record is added to your report, it’s considered a negative item. That’s because most public records on credit reports stem from a debt or financial delinquency. Therefore, it will usually lower your credit score.
Bankruptcy
A bankruptcy can remain on your credit report for seven to 10 years.
If you go through a Chapter 13 bankruptcy, you must repay a portion of the money you borrowed. This type of bankruptcy has a shorter impact on your credit report (seven years) because you paid some of the money back.
Under a Chapter 7 bankruptcy, the individual doesn’t pay any of their debts back. This type of bankruptcy will remain on your credit report for up to 10 years.
Bankruptcy will have a devastating impact on your credit, lowering it by anywhere from 130 to 200 points.
It is difficult to rebuild credit after a bankruptcy filing, but not impossible. For example, while you may not be approved for a regular credit card, you can start with a secured credit card. You will still have financial options available to you.
Tax Liens and Judgments
The Consumer Data Industry Association revealed that the changes showed “only modest credit scoring impacts” on consumer reports. Still, millions of Americans had public records wiped from their reports, which was beneficial overall.
While these two types of entries may not be on reports anymore, they can still affect your finances and life in general. For example, a judgment can impact your ability to qualify for a loan or credit. Lenders may check to see if you have outstanding judgments and reject your application. Similarly, the presence of a tax lien may cause a lender to reconsider your application.
What Can You Do About Public Records on Your Credit Report?
If bankruptcy is on your credit report, and all the information is accurate, you can’t do very much to remove it from the account. However, if the bankruptcy data is incorrect, you can file a dispute.
For tax liens and civil judgments, file a dispute to remove these public records from your credit report. You can contact each of the three major credit bureaus by phone or email and ask them to remove the public records from your file.
For more detailed information on how to remove a tax lien, check out this blog post. And for step-by-step instructions on removing a civil judgment from your credit report, refer to this resource.
It’s essential you check your credit report regularly so you can note when new data appears on your report. If a negative item appears and it’s inaccurate, you should dispute it quickly, before it can significantly impact your credit score.
Your Credit Can Recover From Derogatory Marks
Having derogatory marks on your credit report is not a life sentence. With sound financial behaviors, your credit score can recover. You’ll need to make payments on time, get rid of debts and maintain a good credit utilization ratio. If you don’t know where to start, consider credit repair services.
Lexington Law knows how to spot incorrect data on your credit reports and give you helpful credit tips. Credit repair takes time, so it’s essential you start today.
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