As for the rest of us? It’s a toss-up. Larson says that, in the bigger picture, interest rates could increase across the board since lenders won’t be able to distinguish between people with tax liens and judgments and those without them—meaning more people will begin to default on payments and risk will increase. Credit reporting expert John Ulzheimer, however, says the effect of the change will be far too small to have any real impact on interest rates.
What You Should Be Doing
If you think these changes might pertain to you, Ulzheimer suggests pulling your credit report before July 1st and seeing if you have any tax liens or civil judgments in your file. By law, you have the right to one free credit report every year from each of the credit bureaus from annualcreditreport.com.
Pull your report again later in July and see whether the data is still there (the changes are expected to happen around July first but may take days or even weeks). If you notice a change, it’s fairly likely your credit score is going to increase — and it may be time to apply for that loan you’ve been holding off on.
Still, Ulzheimer warns that the policy change is not a free pass for people with these types of marks on their credit reports. Just because they don’t show up in your credit score doesn’t mean they’ve disappeared—you’ll still need to pay them off or face serious consequences.
“Credit reporting is the least of your problems if you have an outstanding judgment over your head,” he says.
With Ellie Schroeder