How Much Does an IRS Tax Lien Lower Your Credit Score?
According to Experian.com, an unpaid tax lien will most definitely affect your credit score negatively. How much, however, varies since Experian notes that it depends on an individual’s overall track record of paying bills on time. The important thing is to find ways to get the IRS lien paid before considering options you have that can remove a current or old and paid lien from your credit score.
If you never pay your IRS tax lien, it can be reflected on your credit report up to 15 years. Even if you do pay your lien, it can still stay on your credit report for seven years. Experian says that it’s the longest-lasting item that can stay on a credit report.
The affect of your credit score due to not paying a tax lien can significantly reduce your chances of ever getting a loan with a lender. In the event that you manage a loan anyway, a lender will ultimately sock you with higher interest rates. Additionally, an IRS seizure of your property or garnishing of wages over an unpaid lien can affect your credit score even more. The reason for this is that removal of assets by the IRS can prevent you from keeping your credit accounts current.
Experian also says that if you have other late bills, your credit score can be much lower than if you only have an unpaid tax lien and nothing else. Pay all other late debts first and then you can work on the more lengthy process of getting the lien removed from your credit report if you’ve paid it before the seven year mark.
After you fully pay your delinquent tax lien, the IRS should send you a Certificate of Release of Federal Tax Lien, or what’s known as a 668Z form which will remove a tax lien from your credit report. The IRS won’t always file the release form to the credit bureaus if you have multiple liens. If they haven’t, you can search for all paid liens you have through a professional lien search. Contact the IRS to have them send you release forms for these paid liens. Send the release forms to the credit bureaus if they have not removed the liens after seven years.
It’s possible to remove an unpaid tax lien but you need to act early by challenging the lien. If you challenge the lien with a lawyer, the IRS won’t report the lien to credit bureaus within a required thirty-day interval. If the credit bureaus don’t get the information on the lien within those thirty days, it won’t be placed on your credit report. Additionally, if you start a payment plan on your tax lien, you can send the credit bureaus a report from the IRS that reflects this as an anticipated discharge — It can positively affect your credit score.
Tags: 15 Years, Certificate of Release of Federal Tax Lien, Credit Report, Credit Score, Experian, Form 668Z, Garnishing of Wages, IRS, IRS Release Form, IRS Seizure, IRS Tax Lien, Remove a Tax Lien From Your Credit Report