By Mindy Leisure - Advantage Credit
There are three kinds of public records that can appear on credit reports: Bankruptcy Chapter 13 and Chapter 7, state and federal tax liens and civil judgments. However unlike creditors who are data furnishers like credit cards, mortgage companies, etc., courts do not, in most cases, actually furnish the information directly to the credit bureaus. The credit bureaus have to go out and retrieve that information manually.
The credit bureaus have independent contractors that periodically go out to different courthouses around the country and gather information for credit reports. Some counties have online databases that the bureaus can retrieve information from but not all. Those databases often do not contain all the information needed to accurately report a public record. So the contractor must go to the courthouse and scan all the public records into their computer. These records are then sold to data clearing houses that in turn provides this information to the credit bureaus.
Let’s first look at judgments. The majority of civil judgments do not have social security numbers tied to them, so that information is gathered based on name and address. If a consumer lives at an address that was previously occupied by someone who had a judgment on their credit report, chances are the judgment could end up on the new resident’s credit report as well. Similarly, if a person has the same name as someone with a judgment and live in the same state but not necessarily even the same address this too could result in erroneous reporting. Since the gathering of public record information is mostly a manual process there is a lot of room for error.
Tax liens and bankruptcies have a bit less room for error as they do have social security numbers attached to them. However if socials are similar there is still the possibility that an erroneous lien or bankruptcy could show up on a consumer’s credit report.
Why is reporting public records such a manual process? Becoming an actual data furnisher to the bureaus can be a very difficult process. Contracts must be signed, special software incorporated and the bureaus all have minimums of what a data furnisher must have in order to be able to report every month. Most courts do not have the financial resources to become a data furnisher nor will the smaller courts have the minimum requirements or financial resources needed to be able to report. So bringing in independent contractors to gather this information manually is the only avenue the bureaus have to obtain the data. This method may seem a bit antiquated in some ways but since courts are not data furnishers the credit bureaus have very few options when it comes to retrieving public record information.
Because public records can have such a significant negative impact on credit scores and because there is room for error in the way public records are retrieved is just another reason why it is so important to periodically check your credit reports for errors. In studies done it has been determined that 80% of credit reports contained some sort of mistake and out of those 25% were serious errors. Discovering an erroneous public record on your credit report would definitely be classified as a serious error. It’s important to check your credit reports at least once a year…just in case.
TMC - Chief Operating Officer
President/CEO - Pulte Financial Services