What You Need to Know About Public Records on Your Credit Report

A public record on a credit report is a notation regarding your financial history that comes from official government sources. These records generally pertain to adverse financial events like bankruptcies, tax liens, and judgments that are accessible to the public. These entries are distinct from account information reported by lenders and creditors and can significantly impact your credit score and overall creditworthiness.

Understanding Public Records and Your Credit

Public records on your credit report are like flashing neon signs to potential lenders. They indicate past financial difficulties and increase the perceived risk associated with extending credit to you. It’s crucial to understand what constitutes a public record, how it affects your credit, and what you can do about it. These records are not like typical debt or payment history; they are statements of legal proceedings related to debts and financial obligations.

The Big Three: Bankruptcies, Tax Liens, and Judgments

These are the triumvirate of negative public records that can appear on your credit report. Let’s dissect each one:

• Bankruptcies: Filing for bankruptcy is a legal process that allows individuals or businesses to eliminate or repay debts under the protection of the bankruptcy court. Chapter 7 and Chapter 13 bankruptcies are the most common types. Bankruptcies remain on your credit report for a period of 7-10 years, depending on the chapter filed. This is arguably the most damaging public record.
• Tax Liens: When you fail to pay your federal, state, or local taxes, the government can place a tax lien on your property. This lien gives the government a legal claim to your assets until the debt is paid. Paid tax liens used to appear on credit reports, but the credit bureaus stopped including them in 2017. However, unpaid tax liens are still reported.
• Judgments: A judgment is a court order requiring you to pay a certain amount of money to another party. This typically arises from a lawsuit, such as unpaid credit card debt or a breach of contract. Once a judgment is entered against you, it becomes a matter of public record and can appear on your credit report. Paid judgments are typically removed from your report sooner than unpaid ones.

How Public Records Impact Your Credit Score

The presence of public records on your credit report generally has a negative impact on your credit score. The severity of the impact depends on factors such as the type of record, the amount involved, and the age of the record.

• Severity: Bankruptcies usually have the most significant negative impact, followed by unpaid tax liens and judgments.
• Amount: Larger amounts tend to be viewed more negatively than smaller amounts.
• Age: As public records age, their impact on your credit score gradually diminishes. However, they can remain on your report for several years, continuing to affect your ability to obtain credit.

Finding Public Records on Your Credit Report

To see if you have any public records on your credit report, you’ll need to obtain copies of your reports from the three major credit bureaus: Equifax, Experian, and TransUnion. You are entitled to a free credit report from each bureau once every 12 months at AnnualCreditReport.com. Scrutinize each report carefully for any entries in the “Public Records” section. If you spot something unfamiliar, it’s time for further investigation.

Correcting Errors and Removing Public Records

If you find errors in your public records, you have the right to dispute them with the credit bureaus. Gather documentation to support your claim, such as court records or payment receipts. The credit bureau is required to investigate your dispute and correct or remove any inaccurate information.

It’s important to note that even if a public record is accurate, it may be possible to have it removed from your credit report sooner than the standard reporting period. Negotiating with the creditor to have the record removed in exchange for payment is one possibility, but there is no guarantee this will work.

Frequently Asked Questions (FAQs) About Public Records and Credit Reports

Here are some of the most common questions I encounter regarding public records and their presence on your credit report:

1. Can I remove a bankruptcy from my credit report before the 7-10 year period?

Generally, no. Bankruptcies remain on your credit report for 7-10 years, depending on the type (Chapter 7 is 10 years, Chapter 13 is 7 years). Attempting to remove it before then is difficult unless there are inaccuracies.

2. What’s the difference between a satisfied and unsatisfied judgment?

A satisfied judgment means you have paid the debt owed according to the court order. An unsatisfied judgment means you haven’t paid it. Even satisfied judgments can negatively impact your credit, but an unsatisfied judgment will have a much more severe and prolonged effect.

3. How long do judgments stay on my credit report?

Judgments typically stay on your credit report for seven years from the date of the judgment, regardless of whether they’ve been paid, although some states may have shorter reporting periods. However, many credit reporting agencies won’t report a paid judgment.

4. Will paying off a tax lien immediately improve my credit score?

While paying off a tax lien is a positive step, it may not immediately boost your credit score. As mentioned earlier, paid tax liens no longer appear on credit reports. However, an unpaid tax lien can be detrimental. Once you’ve paid a tax lien, confirm that the lien is released and that this information is accurately reflected on your credit report (if it is still being reported).

5. Are all lawsuits public records?

Not all lawsuits are public records that appear on your credit report. Only lawsuits that result in a judgment against you, ordering you to pay money, typically end up on your credit report.

6. Can I get denied for a loan or credit card based on a public record?

Yes, absolutely. Lenders and credit card companies use your credit report to assess your creditworthiness. Negative public records like bankruptcies, tax liens, and judgments can significantly increase the likelihood of denial or result in higher interest rates.

7. How often should I check my credit report for public records?

It’s advisable to check your credit reports at least once a year, or even more frequently if you are planning to apply for a loan or credit in the near future. AnnualCreditReport.com allows you to check your reports from each of the major credit bureaus for free annually.

8. What’s the difference between a lien and a levy?

A lien is a legal claim against your property as security for a debt. A levy is the actual seizure of your assets to satisfy that debt. A tax lien is a claim, while a tax levy is the government taking your property or wages.

9. Can I remove accurate public records by hiring a credit repair company?

Credit repair companies can assist you in disputing inaccurate information on your credit report. However, they cannot legally remove accurate public records before the standard reporting period expires. Be wary of companies that promise to remove accurate information quickly, as these claims are often misleading.

10. Do all types of debt result in public records if I don’t pay them?

No. Only certain debts, when they result in court judgments or tax liens, become public records. Unpaid credit card debt, medical bills, or personal loans typically don’t become public records unless the creditor sues you and obtains a judgment.

11. How do I dispute a public record on my credit report?

You must dispute the public record directly with the credit bureau reporting it (Equifax, Experian, or TransUnion). Submit a written dispute along with any supporting documentation that proves the information is inaccurate or outdated. They are legally obligated to investigate and correct or remove the information if necessary.

12. What happens if I ignore a lawsuit?

Ignoring a lawsuit can have serious consequences. If you don’t respond to the lawsuit, the plaintiff (the person or entity suing you) can obtain a default judgment against you. This means they win the case automatically, and the judgment will become a matter of public record on your credit report.

Understanding public records and their impact on your credit is essential for maintaining your financial health. By staying informed and proactive, you can take steps to correct errors, manage existing public records, and improve your credit score over time.