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Do Student Loans Affect Credit Score?

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Yes, student loans affect credit score, but whether they help or hurt your credit is up to you. It’s easy to see why many believe student loans are nothing but bad news: overall student loan debt in the United States is now more than $1.5 trillion, and 84 percent of borrowers now say student loans are what will prevent them from being able to retire.

But when managed well, student loans can actually help young graduates build credit or improve their existing credit scores. The key is to make sure you’re entering into your student loans equipped with all the information you need to avoid potentially credit-damaging mistakes.

Here’s everything you need to know about student loans and how they can help or hurt your credit score.

How Do Student Loans Help Build Credit?

Used correctly, student loans can be a powerful credit-building tool. Here are three positive ways you can leverage your student loans:

Establishing a positive payment history.

Typically, student loan payments aren’t due until several months after a student has graduated. However, many loan providers allow students to make elective payments toward their loans before the deferment period has ended.

If you’re able, making small voluntary payments toward your loans while you’re still in school can help you establish or improve your credit. Though there’s no active due date on your loans yet, these elective payments still “count” as positive, on-time payments and will be reflected in your credit history.

Since payment history is the most important factor in determining your credit score, these small payments toward your student loans can have a big impact on how quickly you establish or raise your credit score.

Graphic: According to FICO, approximately 21% of those with $50,000 or more in student loan debt still have credit scores of 750 or higher.

Lengthening your credit history.

Many students avoid opening credit accounts during college, a decision that is in many ways a smart move, since it eliminates the temptation of overspending and falling into unmanageable debt. But when it comes time to buy a car or rent an apartment, having no credit is as unhelpful as having bad credit. And 15 percent of your credit score is determined by the average length of your credit accounts, so even after you’ve started building credit, it will take a while for your account lengths to start contributing positively to your score.

If you take out student loans to get your Bachelor’s degree, you’ll have four years of account history already on the record by the time you graduate, which will help raise the average length of all your credit accounts.

Diversifying your credit.

Another factor that impacts your score is how varied your credit accounts are. Having three credit card accounts is viewed as a more negative sign than having one credit card, one student loan, and a mortgage. Spreading your credit across different types of accounts will diversify your credit — a factor that determines 10 percent of your credit score.

How Do Student Loans Hurt Your Credit?

Of course, like any debt, student loans have the potential to be harmful. If your student loans become overwhelming, missed payments or a default on your loans can significantly damage your credit score. Even without missed payments, student loans can potentially skew your credit balance in a way that damages your score.

Below we’ve listed the three major elements of student loans that can harm your credit — and how to avoid or fix them.

Missed or late payments.

Like any credit account, student loans incur fees and detrimental marks when a borrower misses or is late on a monthly payment. Especially since student loans tend to become due in the months after graduation, when many graduates are searching for jobs, relocating, and adjusting to post-graduate life, those monthly payments can be a struggle for even those with an otherwise spotless payment history.

What to Do: If you think you might be unable to make a student loan payment, contact your loan provider right away. You can put your loans into deferment or forbearance, which are two types of postponement options that have no negative impact on your credit. 

However, any late or missed payments from before you postponed your loans will still hurt your score, so it’s important to act quickly.

Graphic: As of 2020, $115 billion in student loans were in deferment and $124.1 billion in student loans were in forbearance.

Defaulted loans.

If you’ve missed a payment by enough time — typically 270 days for federal loans and 120 days for private loans — you will be in default and can be sued for the entire amount you owe. The IRS can also seize your tax refunds and the government or private lender can garnish 15 percent of your wages as repayment until the loan is paid.

Defaulting on a loan can also add costs to the originally borrowed amount. Lenders can add collection costs and, if the borrower winds up in court, legal fees will add to the overall cost of a defaulted loan.

A default will remain on your credit report for seven years from the date of your first missed payment.

What to Do: The best way to deal with a defaulted loan is to avoid it completely by putting your loans into deferment or forbearance before your missed payments get out of hand. 

If your loan in default is a federal loan, you may be able to rehabilitate the loan by contacting the loan provider to negotiate a revised payment plan, and then making nine on-time payments over a period of 10 months.

High debt-to-income ratio.

Even if you make your payments on time and in full, student loans can be potentially harmful if your monthly payment is too high compared to your monthly income. For example, if your monthly loan payment is $800 and you only make $1600 per month, that puts your DTI at 50 percent. Though your DTI isn’t reflected in your credit score, it is something lenders take into consideration when evaluating you as a borrowing candidate.

Having a high debt-to-income ratio also increases the likelihood that you will have missed or late payments, which do harm your credit score directly.

What to Do: Many student loan providers allow borrowers to adjust their payment schedules based on their income. If you contact your loan provider, you may be able to lower your monthly payments to a set percentage of your monthly paycheck. Not only will this make budgeting easier, but it may also make it easier for you to get approved for other types of credit, like a mortgage.

Graphic: A single student loan payment that's 30 days late can cause your credit score to drop by over 80 points.

How to Refinance Student Loans without Damaging Credit

Refinancing your student loans shouldn’t impact your credit in a significant way — assuming you do it correctly. If you’re smart and avoid some common pitfalls, refinancing your student loan can be a great decision that saves you money.

Here’s how to avoid hurting your credit while refinancing your student loan:

Only apply for one refinancing loan.

You should absolutely shop around for the best refinancing offer, but when it comes to submitting a full application, hold off until you’re certain you’ve found the right lender. Like most credit applications, approval for a refinancing loan requires a hard credit check, which will ding your credit slightly.

Many lenders will give you the option to pre-qualify or get a loan offer online for free. Typically, these offers only require soft credit pulls, which don’t impact your credit at all, and collecting offers from multiple lenders will help you find the best refinancing deal.

Keep making loan payments until your refinanced loan is finalized.

Though it may feel pointless to keep making payments on your original loan if you feel confident your refinance will be approved, it’s essential that you keep making those payments until the refinance process is fully completed. Halting payments on your original loan before your refinanced loan is active will result in late or missed payments recorded on your credit report.

Make payments on your refinanced loan on time and in full.

Falling behind on your refinanced loan will have the same consequences as falling behind on your original loan, so it’s just as important to stay up on your payments after refinancing. Many refinanced loan providers also offer options like deferment, forbearance, unemployment protection and more — but you must take advantage of these options before missing a payment in order to avoid harming your credit.

Graphic: In a 2018 analysis, borrowers saved an average of over $17,000 by refinancing student loans with shorter repayment terms.

Does Credit Score Affect Student Loan Approvals?

When it comes to federal student loans, like Stafford or Perkins loans, your credit score usually won’t be a factor. However, if you are in default on a student loan already, you won’t be able to apply for federal student aid until you’ve paid it off.

Some expenses associated with your education won’t be covered by a federal loan, like a personal computer or internet services. If you want to apply for a private student loan, then your credit score will be a factor in determining your approval as well as your interest rates and loan terms.

Is It True That Student Loans Go Away After Seven Years?

The answer to this is: yes and no. Defaulted student loans will be expunged from your credit report after seven years from the final payment date. However, during the seven years that you are in default, you’ll have poor credit score, difficulty securing credit approvals, and if your defaulted loan was a federal loan, will be unable to apply for any other federal student aid.

If you change your mind and decide to make a payment on a loan five years into being in default, the clock will reset and your default will remain on your credit report for another seven years from the most recent payment.

Graphic: Nearly half (48%) of student who started at for-profit colleges during the 2003-2004 academic year defaulted within 12 years.

How to Handle Student Loans the Right Way

1. Pay your student loans on time and in full.

As long as you can afford it, make absolutely certain that nothing gets in the way of your loan payments. If you have a hard time remembering to pay them, consider enrolling in your provider’s autopay option.

2. Communicate with your loan provider.

Options like deferment and forbearance can save you from hundreds of points’ worth of damage to your credit score — but only if you activate them before you miss a loan payment. Establishing open communication with your loan provider early on will make it easier to request the help you need if you wind up struggling to make payments.

3. Pay extra whenever you can. 

If you’re fortunate enough to be able to afford to make extra payments on your student loans, do so. Extra payments can help improve your credit and shorten the length of time it takes to pay off your loan, which will save you interest.

Like all types of credit, there’s good student debt and bad student debt. Taking on student loans can open a world of educational opportunities and help you improve your credit, so long as you approach them the right way. 

If you’re still unsure whether your student loans are dragging down your credit, you can request a free credit report summary and consultation to get a personalized overview of your credit factors. The more you know about your debt, the more control you’ll have over it.

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How Long Before a Creditor Can Garnish Wages?

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The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Have you gotten yourself into a bad financial situation and started wondering how long you have before a creditor can garnish your wages? The answer can be a bit complicated, but in most cases, you don’t need to worry about wage garnishment until your debt has been delinquent for several months.

If you’re in this situation, then you should also know that the wage garnishment process itself can also take multiple weeks, depending on specific circumstances. Keep reading to find out more about wage garnishment.

Understanding Wage Garnishment

Wage garnishment is a legal procedure during which an individual’s earnings are required, by court order, to be withheld by the employer for the purpose of debt repayment.

There are two types of garnishment: wage and nonwage.

  • Wage garnishment means that your employer is legally required to withhold a specific amount of earnings as a result of the court order which is often called a “Notice of Garnishment.”
  • Nonwage garnishment (also known as a bank levy) is when a creditor contacts your bank and accesses funds directly from your bank account.

Typically, wage garnishment happens in one of two ways:

  1. A creditor sues you for nonpayment and wins via judgment.
  2. A state or federal agency initiates a garnishment in cases like  child support, back taxes and federal student loans.

Wage garnishment will continue until the debt is paid off or otherwise resolved. Some states have time limitations for how many years a creditor may garnish wages. Additionally, wage garnishment will be halted if you lose employment.

The total amount subject to garnishment can often include court fees and any interest accrued.

The court will notify you of the impending wage garnishment. Additionally, the court will send a notice either to your bank or your employer. Wage garnishment typically starts within five to 30 days after approval. The exact time will vary depending on the creditor and the state.

How Much of Your Paycheck Can Be Garnished?

There are federal limitations on how much of your paycheck can be garnished, depending on your income level and the type of debt that is owed.

There are also individual state laws about wage garnishment that vary. State laws may often have additional protections, including factors like being the head of a household with dependent children.

Judgments

If you lose a lawsuit and a judgment is entered against you, the creditor or person who won the suit can garnish your wages up to whichever is the lower of these two amounts:

  • 25 percent of your disposable earnings
  •  Any amount greater than 30 times the federal minimum wage (which is currently $7.25)

Note that your employer must notify you about a wage garnishment before it begins, and your employer has to provide you with information on how you can request a hearing about the wage garnishment.

Child Support and Alimony

Child support and alimony are the two types of debt with the most considerable potential for wage garnishment. According to federal law, you can have up to 60 percent of your income garnished. If you’re supporting another child or spouse, the maximum is lowered to 50 percent. Additionally, if you’re more than 12 weeks late on payments, an additional five percent can be taken.

Student Loans

The US Department of Education or any agency collecting on its behalf can garnish up to 15 percent of your pay. This can only occur if you’re in default on your student loan. Student loans are different as they don’t require a lawsuit to proceed with wage garnishment. As soon as your student loans are in default, there’s potential for garnishment.

However, you need to be notified in writing at least 30 days before the wage garnishment is set to begin. The notice needs to include several important details, such as:

  • The total amount you owe;
  • How to get a copy of records related to your loan;
  • How to enter into a voluntary repayment schedule; and
  • How to request a hearing on the proposed wage garnishment.

Taxes

Back taxes is another situation where a court order isn’t necessary. If you owe back taxes to the IRS, they can usually take up to 15 percent. In reality, they will take into consideration several factors before deciding on how much to garnish. The IRS will look at how many dependents you have and your standard deduction amount.

The IRS will notify your employer with a wage levy notice. Your employer will then give you a copy. This notice includes an exemption claim form, which you may want to complete.

State and local tax agencies also have the right to take some of your wages. However, there will be limitations in place on how much they can take, depending on the state.

Exempt Income

Every state has certain types of income that are protected from wage garnishment. Depending on your situation and your income stream, you may be able to protect some or all of your wages.

Generally speaking, the types of exempt income are:

  • Social Security;
  • Disability;
  • Veterans’ benefits;
  • Pension and retirement benefits;
  • Child support; and
  • Alimony.

Additionally, low-income earners who have little or no disposable income may be allowed to keep their wages.

Can You Be Fired for Having Your Wages Garnished?

You cannot be fired or retaliated against in any way by an employer because your wages have been garnished. However, this protection is removed if you have more than one wage garnishment in place. Under federal law, you’re only protected when one creditor is garnishing your wages.

Some states offer more protection, but it’s essential to determine what the protection is in your state. If you have more than one wage garnishment against you, it’s important to talk to your employer and explain your plan of action to rectify the situation.

Can You Protest a Wage Garnishment?

There are several ways to seek relief from a garnishment; however, the best way would be to address the situation prior to a creditor obtaining a judgment against you, either by hiring legal counsel or representing yourself.

Additionally, note that when you receive a notice of garnishment, you may still be ableto work out a deal with your creditors. For example, your federal student loan creditor may offer you the opportunity to opt into a voluntary repayment plan rather than proceed with wage garnishment.

Claim of Exemption

If your income is coming from a source categorized as exempt, you may need to act quickly. Monthly income or savings collected from an exempt income source cannot be garnished. However, you will need to submit a claim of exemption to stop the wage garnishment.

Before your paycheck is garnished for the first time, your employer will give you a notice. The notice includes instructions for filing a claim of exemption. The notice will have an address with the appropriate clerk’s office where you will need to file the claim.

The cost of filing a claim of exemption is minimal but may be extremely beneficial. If approved, it can substantially reduce the amount of your garnishment. You’ll have a hearing in which you can list your living expenses and show any attempts you’ve made to handle the debt without garnishment.

Note that it can take one to two months to schedule a hearing, so you’ll want to file the claim as soon as you receive the wage garnishment notice.

Does Wage Garnishment Affect Your Credit?

The wage garnishment won’t appear as a negative item on your credit reports, but it could be notated on the account in question. While the garnishment itself won’t hurt your score, being late on payments will.

Luckily, you can still take action to improve your credit during and after a wage garnishment. Start by working with a credit repair service, like Lexington Law, to get a good understanding of what condition your credit is in and if anything can be done to help it today.


Reviewed by Kenton Arbon, an Associate Attorney at Lexington Law Firm. Written by Lexington Law.

Kenton Arbon is an Associate Attorney in the Arizona office. Mr. Arbon was born in Bakersfield, California, and grew up in the Northwest. He earned his B.A. in Business Administration, Human Resources Management, while working as an Oregon State Trooper. His interest in the law lead him to relocate to Arizona, attend law school, and graduate from Arizona State College of Law in 2017. Since graduating from law school, Mr. Arbon has worked in multiple compliance domains including anti-money laundering, Medicare Part D, contracts, and debt negotiation. Mr. Arbon is licensed to practice law in Arizona. He is located in the Phoenix office.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

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Black Friday Spending: 25 Key Trends

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The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

For many, Black Friday marks the start of the holiday shopping season. A day known for its significant deals and discounts in retail stores and beyond, it falls on the Friday after Thanksgiving and stirs quite the frenzy among holiday shoppers.

Being the first day after the last major holiday before Christmas, the undeniable high volume of Black Friday spending has made it one of the more profitable retail days of the year. Countless stores reserve this day for their largest sales of the year, most notably on electronics, jewelry and toys.

Falling closely after Black Friday is Cyber Monday, which takes place on the Monday after Thanksgiving. While both are known for their fantastic deals, the main difference between the two is that Cyber Monday is strictly dedicated to online shopping and bargains found online. Black Friday deals are both online and in brick-and-mortar stores.

Although there are deals to be had on these days, it’s important to remember that needless purchases can be a significant driver of credit card debt. Huge sales events like Black Friday and Cyber Monday can easily tempt you into spending money you don’t have.

Given that 57 percent of 2019 Black Friday spending was done using credit, make sure whatever you purchase this year is something you actually need (and not just an impulse buy driven by perceived savings).

Black Friday Spending Statistics

With many stores opening as early as midnight the day after Thanksgiving, shoppers wait all year in anticipation of Black Friday. Consumers are willing to camp out in front of their favorite stores in order to be first in line for doorbuster deals, or travel out of town just to snag a coveted sale.

  1. 174 million Americans shopped between Thanksgiving and Cyber Monday in 2017, which beat the National Retail Federation’s pre-holiday prediction that 164 million shoppers would participate. [Source: National Retail Federation]
  2. Those 174 million Americans spent an average of $335.47 per person.  [Source: National Retail Federation]
  3. Black Friday digital revenue grew by 14 percent in 2019 over the previous year. [Source: Salesforce]
  4. Around 63 percent of growth in the holiday retail market is due to Ecommerce growth. [Source: Adobe]
  5. Digital revenue for Black Friday 2019 amounted to $7.2 billion. [Source: Salesforce]
Black Friday digital revenue grew by 14% in 2019.

Demographic Trends

The earlier years of Black Friday typically drew in droves of parents buying gifts for their families and children. These days, more Millennials and Gen Z shoppers have taken to participating in Black Friday. Location-wise, the top spending states in 2019—North Dakota, Texas and Wyoming—are typically those with a lower-than-average cost of living.

  1. Millennials were the biggest spenders on Black Friday in 2019. [Source: PYMNTS]
  2. Millennials spent an average of $509.50 on Black Friday in 2019. [Source: PYMNTS]
  3. While Millennials took the lead for highest spend, Black Friday spending increased by 34.1 percent for consumers of all ages and incomes between 2018 and 2019. [Source: PYMNTS]
  4. Bridge Millennials—those who bridge the age gap between Generation X and Millennials—spent an average of $479.40 on Black Friday in 2019, the second-highest average spent of any age group. [Source: PYMNTS]
  5. Almost 60 percent of shoppers 73 and older said they would not shop on Thanksgiving Day in 2019. [Source: PWC]
Millennials were the biggest Black Friday shoppers in 2019, spending an average of $509.50.

How Are People Shopping on Black Friday?

In years past, Black Friday was famous for drawing enormous crowds into physical retail stores, malls and big-box stores like Best Buy, Walmart and Target. Mile-long lines of tents camped outside the evening of Thanksgiving was typical, and setting out to shop at midnight was a normal occurrence.

In recent years, however, the shopping frenzy has transformed into an online affair, with more consumers choosing to snag their deals from the comfort of their own homes with digital purchases.

On top of this new trend, the current pandemic has shifted the way consumers shop in 2020. Because of this, Lexington Law polled 2,000 Americans to see if they would be staying home this Black Friday. An astonishing 79 percent of respondents said they plan to stay home.

Are Americans Staying Home This Black Friday? 21%: No; 79%: Yes.
  1. Black Friday 2019 saw 142.2 million buyers shopping online. [Source: National Retail Federation]
  2. $2.9 billion in Black Friday sales were purchased on smartphones, making Black Friday 2019 the biggest shopping day for smartphone sales ever. [Source: Money]
  3. About 58 million people only shopped online, while 51 million people shopped exclusively in stores on Black Friday in 2017. [Source: National Retail Federation]
  4. About 40 percent of U.S. consumers didn’t make any purchases at all on Black Friday in 2019. [Source: PYMNTS]
  5. A quarter of 2019 Black Friday shoppers traveled more than 25 miles to visit a physical store. [Source: Fiserv]
  6. Black Friday 2017 consumers who shopped both online and in store spent $82 more than the online-only shopper, and $49 more than the in-store-only shopper. [Source: National Retail Federation]
  7. 73 percent of digital traffic on Black Friday 2019 came from a mobile device. [Source: Salesforce]
  8. Sales from Americans shopping on their smartphones were predicted to increase by $14 billion in 2019 compared to 2018. [Source: Adobe Analytics]
  9. 4.2 percent of all Black Friday 2019 mobile orders were sourced by a social media referral. [Source: Salesforce]
  10. Amazon accounted for 54.9 percent of all sales on Black Friday in 2017. [Source: TechCrunch]

What Are People Shopping for on Black Friday?

Compared to a typical Friday, certain categories’ sales skyrocket on Black Friday. Clothing, electronics, grocery items, books, music and sporting goods are common categories of spend year after year. Other items, such as home furnishings, tools and auto parts are less commonly shopped, but they still see an increase in spend during Black Friday.

  1. In 2019, electronic sales were five times higher on Black Friday as compared to an ordinary Friday; sporting goods were 4.5 times higher; and clothing was four times higher. [Source: Fiserv]
  2. Jewelry topped the “best deals” category for products bought on Amazon on Black Friday in 2019. [Source: Money]
  3. In 2019, clothes and accessories were the primary driver of Black Friday spending, both online and offline. 56 percent of shoppers purchased them online and 57.3 percent shopped in stores. [Source: PYMNTS]
  4. Shoppers now turn to their favorite brands’ social media feeds to find deals and products. In 2019, the brands with the most social callouts on Black Friday were PlayStation, Nintendo, Apple, Xbox and Google. The top five retailers were Amazon, Walmart, Target, GameStop and Best Buy. [Source: Salesforce]
  5. Of consumers who shopped for gifts during Black Friday 2019, 58 percent went for apparel; 33 percent went for toys; 31 percent went for electronics; 28 percent went for books, music, movies or video games; and 27 percent went for gift cards. [Source: National Retail Federation]
Top Black Friday Money Makers in 2019: Apparel, Toys, Electronics.

This Year, Shop Smart

Events like Black Friday and Cyber Monday aren’t inherently bad, but they can certainly push you to spend more than you can afford if you aren’t careful. If you plan on using your credit card for Black Friday shopping this year, make sure you establish how much you can afford to borrow at once. Once you determine that number, don’t deviate from it—no matter how sweet those sales might seem!

The amount of credit you borrow compared to your revolving credit limit is what determines your credit utilization ratio, which should be kept as low as possible. Generally, if that ratio exceeds 30 percent, you risk a drop in your credit score.

By establishing your personal credit limit up front (in other words, the amount of credit you can afford to pay back on time), you’ll save yourself financial stress down the line. Avoid that burden and allow yourself to enjoy the holidays by staying out of debt and shopping responsibly this season.

If you do find that your credit score isn’t where it should be, the consultants at Lexington Law Firm are always available to diagnose your credit and help you get back on track.


Reviewed by Cynthia Thaxton, Lexington Law Firm Attorney. Written by Lexington Law.

Cynthia Thaxton has been with Lexington Law Firm since 2014. She attended The College of William and Mary in Williamsburg, Virginia where she graduated summa cum laude with a degree in International Relations and a minor in Arabic. Cynthia then attended law school at George Mason University School of Law, where she served as Senior Articles Editor of the George Mason Law Review and graduated cum laude. Cynthia is licensed to practice law in Utah and North Carolina.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

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Public Records on Credit Reports

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The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

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.


Reviewed by John Heath, Directing Attorney of Lexington Law Firm. Written by Lexington Law.

Born and raised in Salt Lake City, John Heath earned his BA from the University of Utah and his Juris Doctor from Ohio Northern University. John has been the Directing Attorney of Lexington Law Firm since 2004. The firm focuses primarily on consumer credit report repair, but also practices family law, criminal law, general consumer litigation and collection defense on behalf of consumer debtors. John is admitted to practice law in Utah, Colorado, Washington D. C., Georgia, Texas and New York.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

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