In July, credit bureaus will be changing the way they calculate credit scores and the difference could mean a bump in your numbers.
Certain long-overdue debts and unpaid taxes will no longer be a factor in determining someone’s credit score. This means there will be less black marks lowering the credit scores of millions of individuals, a credit bureau spokesperson said in a statement on Monday.
When it comes to the changes, they are predicted to have a “modest” impact on credit scores, according to the statement from the Community Data Industry Association. Nearly 11 million people would have a bump of less than 20 points, while about 700,000 would see a 40-point bump, the Wall Street Journal reported, citing FICO data.
As a result of financial investigations, it was discovered that many court ordered debts were not properly enforced, and the records were kept in sloppy conditions. Therefore, court orders for unpaid debts will no longer be counted as black marks on credit scores. These changes indicate that a court-ordered debt or unpaid tax may not be the best way to evaluate an individual’s ability to handle credit.
Credit bureaus TransUnion, Equifax and Experian will be changing their policies in the summer to remove court judgments and tax liens from credit scores.
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