The thee major credit reporting firms, Experian, Equifax, and TransUnion, are moving to eliminate records of tax liens from their credit data and credit reports.
The three companies, which provide vital, behind-the-scenes services in consumer credit, have been grappling with class-action lawsuits over their handling of consumers’ tax liens and judgment information.
This is a mistake. The right answer is to defend, actively, those suits that are wrong, rather than to surrender to the extortion of lawfare, and to correct the mishandlings of the tax liens in their data and reports.
Running away from the matter altogether can only further deprecate the usefulness of these credit reporting agencies. All debt needs to be reflected in the reports so that accurate pictures of an individual’s credit risk can be developed.
Beyond that, a tax lien cuts two ways: it’s the result of a serious failure, whether of the one with the lien or of events beyond the person’s control. With the other slice, like any credit card, a record of prompt payments, keeping the lien current until it’s paid off, would reflect favorably in the minds of lenders reading the reports.
Absent the data, though, a loan’s interest charge would need to be increased to reflect the greater uncertainty, or the loan denied altogether, and either of these outcomes will harm far more consumers far more deeply than the numbers and injuries claimed by the suits.