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Excited About Credit Scoring Changes? What You Need to Know About FICO Score XD, and Removal of Tax Liens and Judgments

March 21st, 2017 · No Comments · Credit Scores

by Staff

Excited About Credit Scoring Changes? What You Need to Know About FICO Score XD, and Removal of Tax Liens and JudgmentsAn NBC Nightly News report that aired in March 2017 shared a couple of exciting credit scoring changes that will help improve the credit of millions of U.S. consumers. But before you get too excited, make sure you understand these changes and how they will (or won’t) affect your credit repair process. Here’s what you need to know about the FICO Score XD, and the removal of tax liens and civil judgments from credit reports.


What is FICO Score XD?

FICO Score XD is a FICO scoring model that generates temporary FICO scores for consumers who otherwise would not have one. Why wouldn’t they have one? Because they’re “credit invisible,” meaning it’s been too long since they used credit, or they never used credit at all.

You see, FICO traditionally only generates a score for those who have:

  • At least one credit account that is at least 6 months old AND
  • At least one credit account that has reported to the credit bureaus within the past 6 months

FICO XD relies on alternative data but still generates a score in the same 300-850 range used in other FICO scoring versions.

What information is FICO XD based on?

Instead of relying on credit account history (e.g., credit cards, auto loans, student loans, personal loans, mortgages), FICO Score XD is generated by alternative data:

  • Landline, mobile, and cable payments
  • Credit bureau data (if available)
  • Public records and property data (e.g., whether you own a home, home value, how often you move, bank records, occupational licenses)

In other words, some things that normally only show up in credit reports for the wrong reasons (i.e., you don’t pay your phone bill) will now help your credit for all the right reasons – paying on time.

How many more consumers are scorable through FICO Score XD?

Millions of consumers are scorable through FICO XD. And the core benefits described by FICO have already proven impressive:

  • Of applicants who were previously unscorable, lenders have been able to use FICO XD to score more than half of them
  • Of applicants now scorable through FICO XD, more than a third have scores above 620
  • Of applicants scoring above 620 who are approved for credit, nearly half of them use that credit to boost their scores to 700 or higher

As with all FICO Scores, FICO XD comes with reason codes letting consumers know what factors are most influencing their scores.

Does everyone get a FICO XD?

No. You will only be scored under the XD model if you have not had at least one active credit account over the past 6 months. And even if you do receive an XD score, it’s only temporary. Once the score allows you to establish credit history, you will receive a traditional FICO Score.

When will FICO Score XD be available?

FICO XD is being used now, which lenders can access via Equifax.

Which lenders use FICO XD?

FICO is offering FICO XD to bank credit card issuers. It’s not clear, though, which banks are using it. One thing is certain though. FICO Score XD is used by lenders who want to consider extending credit to consumers who are otherwise unscorable because they haven’t used credit in a long time, or they never used it at all.

How will FICO Score XD help me get credit?

If you are credit invisible (i.e., you’ve never had credit or it’s been years), FICO XD will give you a credit score that credit card issuers can use to consider you for a credit card. If you are approved, you will then have an open credit account that you can use to create positive credit history.

Does everyone get a FICO Score XD?How was the FICO XD model created?

FICO Score XD was developed in partnership with LexisNexis Solutions and Equifax. It’s based on a six-point test:

  • Ability to comply with relevant regulations
  • Depth/breadth of information provided
  • Scope and consistency of coverage across populations
  • Accuracy
  • Predictiveness
  • Additive value

FICO XD then went through pilot testing with a dozen major banks. Based on the numbers reported by Nerdwallet, the results of pilot testing were impressive:

“Within six months of opening a credit account, the new cardholders were able to get traditional FICO scores, [FICO] said. And they are proving to be good customers: Nearly half of those who had FICO XD scores of at least 620 went on to achieve high credit scores (700 or higher) two years after getting a credit card.”

Learn more about credit scoring.

Tax liens and civil judgments

If you have tax liens or civil judgments dragging down your credit score, this change may be especially welcome news. In some circumstances, the credit bureaus will no longer include these negative listings in credit reports.

What is the criteria for removal (or exclusion) from credit reports of tax liens and civil judgments?

This credit reporting change does not apply to all tax liens and civil judgments. They will only be removed from credit reports (or never added at all) if the listings do not include the consumer’s:

  • Name
  • Address
  • Date of birth or social security number

As reported by The Washington Post, “Public records sources will also need to be updated on a timely basis to be eligible for inclusion in credit files. Most civil judgment data and up to half of tax lien information cannot currently meet these tests, according to one industry estimate.”

When will this change go into effect?

Any tax liens or civil judgments that do not meet the new credit reporting criteria (outlined above) will be removed starting July 1, 2017. In addition, the same criteria will be applied to any new tax liens or civil judgments; if they don’t meet the criteria, they will not be added to credit reports.

How much will these changes affect credit scores?

As reported by The Consumerist, FICO data shows that credit scores could increase by:

  • 20 points for 11 million consumers
  • 40 points for 700,000 consumers

As for VantageScores, The Washington Post cites a study showing that 8 percent of consumers would see an average increase of 10 points.

Why are these changes being made now?

When asked about credit reporting changes relative to tax liens and civil judgments, the Consumer Data Industry Association Interim President Eric J. Ellman told The Washington Post this:

The credit bureaus have adopted “enhanced public record data standards for the collection and timely updating of civil judgments and tax liens.”

Ellman referenced the National Consumer Assistance Plan, a set of initiatives created after a 2015 settlement with the attorney general of New York, the first of two big settlements with the credit bureaus that year (each of which required changes be instituted within 3 years’ time).

First, there was the settlement with New York Attorney General Eric Schneiderman. That settlement required TransUnion, Experian, and Equifax to:

  • More thoroughly investigate credit disputes submitted by consumers
  • Inform consumers of their options when disputes are rejected
  • Wait 180 days before listing delinquent medical debt on credit reports
  • Stop listing on credit reports any delinquent debts that do not stem from an agreement or contract
  • Create a National Credit Reporting Working Group to develop best practices and policies
  • Increase oversight of data furnishers
  • Make more visible on credit bureau websites the free credit report options available to consumers through

Then, a couple of months later, the credit bureaus reached a similar settlement with attorneys general in 31 states. As reported in another Consumerist article, this settlement required the credit bureaus to:

  • Maintain information about problems with entities that furnish them data and make that information available to states
  • Use a better, more detailed system to share data with furnishers
  • Create an extensive process for complicated disputes involving identity theft, fraud or cases in which two people’s identities have been confused
  • Launch investigations when consumers report mistakes
  • Refrain from peddling fee-based credit-monitoring services or other products until a consumer’s complaint is resolved
  • Educate consumers about how they can further dispute the outcome of an investigation
  • Provide the name of the original creditor when a debt collector seeks to add an unpaid bill to a credit report

In addition to rolling out these changes nationwide, the settlement required the credit bureaus to pay $6 million to the states involved in the settlement – Alabama, Alaska, Arizona, Arkansas, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Maryland, Massachusetts, Michigan, Missouri, Nebraska, Nevada, New Mexico, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, Vermont, and Wisconsin.

Finally, there is no denying the impact of the pressure placed on credit bureaus by the Consumer Financial Protection Bureau (CFPB) since it started supervising all aspects of credit reporting in 2012.

In its March 2017 Supervisory Highlights Consumer Reporting Special Edition, the CFPB outlines three key areas in which it has focused its efforts:

  • Fixing data accuracy at consumer reporting companies: “The CFPB directed them to make necessary changes, and they did. In recent exams, examiners have found that quality control programs have been instituted that include tests to identify whether reports are produced for the wrong consumer and whether reports contain mixed-up files.”
  • Repairing broken dispute processes at consumer reporting companies: “Continued monitoring has shown that the consumer reporting companies have improved processes for investigating disputes and are improving response letters to consumers.”
  • Cleaning up information from furnishers: “Several furnishers have dedicated more resources to ensuring the integrity of the information. This effort includes better investigations and handling of disputes, notifying consumers of results, and taking corrective action when inaccurate information has been supplied.”

Learn more about how the CFPB regulates the consumer reporting industry.

Credit Reporting Changes: Liens and JudgmentsWhat are the pros and cons of these changes?


Credit reports are notorious for containing inaccuracies. Tax liens and civil judgments are no exception. NBC News reports that, in the settlement reached between the credit bureaus and 31 state attorneys general, “Attorneys general alleged liens and civil judgments were often attached to the wrong people, unfairly hurting their ability to access credit for a home, car or gym membership.”

These kinds of mistakes not only affect the creditworthiness of consumers whose credit reports contain these inaccurate listings. It also initiates an often long, frustrating process of getting these mistakes sorted out.

Tax lien and civil judgment inaccuracies should be greatly minimized by increasing the criteria necessary for them to be included in credit reports in the first place.

Plus, credit scores will go up, theoretically clearing the way for more credit approvals.


The more information lenders have about borrowers, the more confident they can be in extending credit. Without tax liens or civil judgments factoring into credit reports and scores, lender confidence may be compromised and consumers could pay the price.

As reported by USA Today, less precise lending data means:

  • Lenders may be less likely to extend credit
  • When they do extend credit, it could be more expensive
  • Borrowers may get credit they cannot afford

“The bottom line is this is not consumer-friendly,” says Nessa Feddis, the senior vice president for consumer protection and payments at the American Bankers Association. “People will get loans even though they may not have the ability to repay them.”

There is some statistical evidence to back this up.

Tim Coyle, senior director of real estate and mortgage for LexisNexis Risk Solutions told The Washington Post that borrowers with a tax lien or judgment are 5 ½ times as likely to end up in serious default or foreclosure.

Other ways to improve your credit

Whether you benefit from these credit scoring changes or not, there are plenty of other ways to improve your credit that are worth getting excited about. If you have no credit, get yourself a secured credit card. If you have bad credit, make it better with our 20-Step Guide to DIY Credit Repair.

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