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Tax Liens On Credit Reports

by: Sahil | last updated: December 02, 2009
Tags: Tax liens on credit reports, credit, tax, liens, credit scores

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Tax Liens On Credit Reports

A tax lien is a lien forced by law on assets to ensure the payment of taxes. A tax lien might be forced for aberrant taxes due on real or personal property, or because of failure to shell out income taxes or any other additional taxes. A tax lien on a credit card definitely affects the credit score and the credit report in a negative manner.

A tax lien can remain on a credit report indefinitely if not paid off or can remain for seven years even if it is paid off. There are no quick ways of wiping off this information from your credit report. Since tax liens on personal property go with the land a person who is beneficiary of such property may be obligated to pay off the lien.

The presence of a tax lien on your credit report will not only drop your credit score it will also affect other future financial transactions. You may be denied credit, student loans, new credit cards, mortgages, an increase in the credit limit, and may have to pay a higher interest rate on all credit products.

In light of the indelibility of this mark on your credit report, it becomes important to keep other factors in the credit reports positive. Timely payments, attempts to pay off the tax lien, and keeping credit card balances in check will go a long way in improving your credit score even with a tax lien on it.

In order to remove the lien and clearing the record from the credit report, the individual must pay off the debt, followed by a seven-year period. A taxpayer should take the time to contact the three major credit bureaus Equifax, Experian, and TransUnion, to reassure a tax lien is no longer a component of their credit report.

The individual might find that the tax lien might still be listed because it was not reported as being paid by the Internal Revenue Service or because a credit bureau did not take the time to update an individual's credit report. The better option is avoidance. An individual must on no account permit a tax lien to be sited on their assets and that comes from doing whatsoever it takes for a person to stay up to date with their tax payments.

Being appropriate with your taxes and your good credit are grave matters. Getting them entangled is by no means a good idea. However if you think that the tax lien is incorrect then it can be disputed by submitting relevant proof of the same along with the credit report and a short summary of explanation that clarifies the errors regarding the lien.

Under the Fair Credit Reporting Act, all the three bureaus are obligated to investigate and provide clarification about disputes to the consumer within 30 days of filing such dispute. Make sure that you provide all the relevant proof such as copies of title to the property, title insurance (if any), and a copy of tour credit report highlighting the errors in the same.

Having a tax lien on your credit report does not mean the end of the world and credit can still be obtained and credit scores made favorable by making timely payments and paying off the lien. However it cannot be denied that a tax lien on your credit report leaves an unfavorable indelible mark on it for at least seven years.