Liens and judgments are public records that traditionally have helped uncover civil court filings on individuals during the credit review process.
Changes have been made as to what public records would appear on consumer credit reports. Bankruptcy data is still shown, but liens and judgments are “negative records” that have been mostly removed from credit reports. Liens and judgment data gives additional insight that is needed to reduce risk and see a more complete credit profile.
Consumers with a lien or judgment record on file are almost 2x more likely to default on a debt obligation than those without a lien or judgment!
A civil judgment is when a creditor sues for an outstanding debt and wins. Following the case, the creditor will have new means for pursuing payment, including seizing funds from checking or savings accounts. Judgments can impact consumers' abilities to qualify for a loan or credit and therefore should be considered in addition to consumers' credit profiles.
The IRS can file a tax lien against those who fail to pay their taxes. It is automatically filed when someone owes more than $10,000. A tax lien allows the IRS to take any payment received when assets are sold or liquidated. As with civil judgments, liens are no longer shown on your credit report. However, being in a tax lien situation can negatively impact your finances, which can greatly reduce the consumer's ability to pay back the loan.
These are just a couple of examples of judgments and liens that will impact the consumer and the lending process.