Approve rubber stamped on a credit report with a high credit score. Artwork crated by the photographer.

Tax liens, civil judgements and unpaid medical bills will no longer be counted against consumer credit scores, as of July 1. Lenders and originators have long used credit scores as part of the mortgage application process and will continue to do so, they say, despite the change in reporting requirements.

As the result of a lawsuit alleging that consumers’ credit scores were unfairly lowered for including liens even after they’d been removed, or having liens assigned to consumers in error, the three leading credit bureaus, Experian, Equifax and Transunion, agreed to stop counting them against credit scores.

While Federal Housing Administration loans allow credit scores as low as 580, the average FICO score of an approved FHA borrower is 683, according to Ellie Mae. Ten points either way can mean a lot to a borderline borrower.

The anticipated result of the change is that about 8 percent of consumers will see their credit score rise an average of 10 points, according to analysis by VantageScore Solutions, a credit score analytics firm. Even FICO, the firm Fannie Mae and Freddie Mac rely on to gauge borrower risk, said the impact on borrowers’ credit scores would be “moderate.”

That’s good news for borrowers, said Chris Nard, president of home mortgage lending at Citizens Bank. Borrowers who were wrongly penalized for liens that no longer existed or were erroneously ascribed to them will rightly see their credit score better reflect their credit-worthiness.

“If it [the lien] was a real risk, the borrower would have other issues in his or her credit background that we would see as we underwrote the file,” Nard said. “At the same time, it may help borrowers in some instances where they were in a product. It may move them into a different risk-based price bucket.”

Several national and local lenders did not return phone calls requesting comment on this issue.

On flip side, there are consumers who may see a bump in their scores with the removal of correctly ascribed liens, but the outcome won’t be catastrophic, according to Nard.

“I think we have the same orientation towards them as Fannie Mae and Freddie Mac,” he said. “Overall, it shouldn’t be much of an impact to the risk decision.”

At press time the GSEs had made no changes to their reporting requirements.

Still, nearly a month after the change, there isn’t a consensus on how the risk that these liens represent should be accounted for in the mortgage underwriting process, said Ben Giumarra, a compliance consultant with Spillane Consulting in Braintree. In the absence of certainty, Giumarra recommends caution.

“A conservative approach would be to add an additional check on a percentage of loans, just something tacked on to the pre-funding quality control,” Giumarra wrote in an email. “Lenders can still have the same information provided (at an additional cost) as part of the credit report.”

The Broader Question

The median sale price of a single-family home set a new, national high in June at $263,800, according to the National Association of Realtors. Last week The Warren Group, publisher of Banker & Tradesman, reported that the median price of a single-family home in Massachusetts in June hit $395,000 after 15 consecutive months of increases.

The meteoric rise in home prices has given rise to questions about the impacts of decreased home affordability and whether or not the nation’s real estate market is headed into another bubble. Is this most recent increase in credit availability evidence that we’re charting a course back to the bad old days of mortgage lending in the early 2000s?

The data suggests we aren’t. The Mortgage Bankers Association (MBA) measures the availability of mortgage credit each month. The Mortgage Credit Availability Index (MCAI) increased 0.1 percent to 178.5 in June, the most recent month for which data is available.

To put that into context, the index was benchmarked to 100 in March 2012. And while it’s been on a more or less steady rise since then, the MCAI is still comfortably below the 850 range, where it was in the second half of 2016, before the housing market crashed, setting off a world-wide recession many corners of the globe are still recovering from.

A healthy, sustainable range for the MCAI “is between 200 and 300,” said Lynn Fisher, MBA vice president of research and economics.