@Anonymous wrote:hi folks i got rid of a tax lien showing on my tu report it hit my fico and score drops 7 points can someone help me figure this one out
thanks
Welcome to the forums!
Short and simple answer: we would need to look at the before and after reports to give a good answer as it could be something easy to pick out (balance change, etc, tax lien removal doesn't necessarily happen in a vacuum).
That said, the long complicated answer: in general there's a concept of bucketing in the FICO algorithm, such that people are scored against others with similar profiles (it would be somewhat absurd to compare my own report to someone with a gold-plated report and 10+ years of history) and as such we all have a range between min to max score for us personally, and it's not the global scorecard that is commonly discussed.
As an example, I have tax liens on my report, and it's virtually impossible for me to get above a 680 on my Beacon 5.0 score currently, and verry difficult to get below 660 no matter what I do to my report (including everything from significant balances to adding another tax lien temporarily, admitted whoopsie with the IRS on that one).
We're fairly confident that tax liens and some other derogatories are bucketable events; so if one is removed, especially if this is your last tax lien or significant derogatory, you're now left with whatever is left on the report and typically that will place you into a higher scoring bucket. Doubly true if the report is now "clean" and you're now bucketed with the pretty credit people whereas many who are building credit, may have shorter and less varied histories than the people in the new bucket.
The temporary problem with this is the minimum score in that bucket, may be lower than the max score in the prior bucket, so when you shift, you might wind up at a lower score for now, but with a higher max potential.
Getting rid of a derogatory is always, always good; however, in the complicated world of credit scoring sometimes it can be a short-term detriment, but longer term it's pure gold. Many congrats for getting the lien resolved!
