How does a tax lien affect your credit?
As of April 2018, tax liens no longer affect your credit score. All three major credit reporting agencies decided to drop tax liens from their reports. However, an unpaid tax lien can lead to tax levies – where the government comes in and seizes your property to satisfy your tax debt.
This means you could lose your bank accounts, your car, or even your home if the tax debt is large enough. So, while tax liens no longer directly affect your credit history, they can still have a major impact on your finances.
How long does a tax lien stay on your credit report?
State and federal tax liens no longer appear on your credit reports. Before April 2018, paid tax liens remained on your credit report for seven years from the date it was filed and unpaid tax liens remained indefinitely.
Understanding Tax Liens
Tax liens are similar to civil judgments in that they are a legal remedy for your creditors to collect money from you. However, with a federal tax lien in place, the IRS establishes that they have a legal right to your property. This includes:
- Real estate you own – houses, land, etc.
- Personal property – your cars, jewelry, etc.
- Business property – any business property as well as accounts receivable (if you own a business)
- Financial assets – your bank accounts, retirement accounts, etc.
Having a federal tax lien makes it impossible to sell your home or qualify for new credit. It takes precedence, so when you try to sell your home, part of the purchase price has to be used to satisfy the lien – a deal that few buyers will agree to.
Tax liens can easily turn into levies, and the IRS has already established that it is “first in line” to collect. So, creditors know that they won’t have much recourse if you default in the future.
The longer the debt goes unpaid, the greater your risk of being levied and having your property and assets seized.
How to Remove a Tax Lien From Your Credit Report
Tax liens are not supposed to be on your credit reports anymore. However, if you still see one on your credit report you have the right to dispute it under the Fair Credit Reporting Act (FCRA).
You also have the right to dispute any other information on your credit report that is questionable. Some items you can dispute include bankruptcies, foreclosures, repossessions, charge offs, judgments, tax liens, collections, late payments, and more.
Working with a Professional Credit Repair Company
It’s often best to work with a professional that works with three major credit bureaus and creditors every day. If you have a tax lien or any other negative items on your credit report and aren’t sure exactly how to go about removing them, there is help.
Get in touch with our team of credit repair professionals and let them deal with the back and forth with the credit bureaus for you. They can help you improve your credit score and have peace of mind knowing that you have the best chance of getting it removed.
Remove Your Tax Liens Now!
If you’re ready for a fresh start, let the professionals at Lexington Law Firm take care of it for you.