Tax liens are as final as they come. If someone has a tax lien on their credit report and credit history, it can be awhile before they qualify for clean credit. Why? A tax lien is seen by creditors and lenders as a key indicator of a consumer’s inability to pay his obligations. When IRS tax debt isn’t paid, the government can put a lien on a taxpayer's property. The lien will stay on the credit report until tax settlement of the debt occurs.
In addition to a tax lien, the IRS can start wage garnishments as well. Instead of trying to fight the IRS every step of the way, find a way to work with them to resolve tax problems. Dealing with the Internal Revenue Service on repayment of your debt can be challenging and arduous. As long as the tax debt isn’t paid the tax lien will stay on your credit report.
As long as this stigma remains on your credit report, you will have extreme difficulty in obtaining the following:
- Mortgages
- Mortgage refinance
- Credit cards
- Auto loans
- Loan refinance
- Debt consolidation
- Students loans
If you are looking to minimize the impact of a tax lien, consult a tax attorney, tax accountant, or a tax advisor. Only a tax professional aware of tax codes, tax laws, and the inner workings of the IRS can help you mitigate the effects of a tax lien.
The first step in clearing the tax lien off your credit report is to pay off your tax debt. According to tax experts, it takes seven years for the tax lien to be cleared off your record once your tax debt has been settled. To confirm that the lien is off your credit report, call one of the major credit bureaus Experian, Equifax, or TransUnion, to get your free credit report.
You may discover that the tax lien may still be listed on your report because your tax debt payment wasn’t updated on your credit report. You don’t want to be surprised when you apply for credit or a loan to discover that the lien is still on your report. Don’t expect the government to help you in clearing your credit history, the best step is prevention. Never get into a situation in which a tax lien against you arises.
The best way to deal with income taxes due is to pay them off every year, don’t let them build up to unmanageable proportions. Always be timely with your taxes and current with your credit. It is extremely important to have a good tax record and credit score.