When an individual incurs an unpaid tax bill with the IRS, a tax lien can be filed to force an individual to pay their obligations. Tax liens are there to protect the government so that it can claim your property in case an individual doesn’t pay their taxes. And once tax liens are filed, it becomes known to everyone including different credit reporting agencies thereby affecting credit reporting scores.
Having a good credit report score gives bank and other lending institutions the information whether they will grant an individual a loan or not. It is likewise a useful edge as a would-be renter because you can easily pass the screening requirements that landlords may have especially when it comes to your capacity to pay.
The Problem With Tax Lien
Many people with tax liens on their credit reports believe that the authorities have directly reported the lien to credit bureaus. What happens is that many credit bureaus actively seek tax liens and since they are considered as public records, they can easily access them. It is important to take note that tax liens are the most challenging credit issues that many consumers face as they can destroy FICO scores thereby lowering the credit score. And once the lien is paid, it will still continue to impact credit scores as long as they remain in the credit files and will possibly stay in credit reports forever.
However, the Consumer Financial Protection Bureau found many caveats with credit reporting and thus recommended the change to help many consumers. Since July of this year, credit reporting companies are working to remove tax liens. It is estimated that 11% of the population will have their judgment removed from their file. Credit reporting agencies such as Experian, Equifax, and TransUnion have reduced their reporting frequency for bankruptcies, civil judgments, tax liens, and other public records.
How To Remove Tax Liens
While some individuals will enjoy the benefit of having their tax liens removed based on the new law, what if your tax lien is not one of them? There are still things that you can do to remove your tax liens from your credit reports. Below are some of the things that you can do to remove tax liens from your credit report.
- Ask for a copy of your credit report: Once you have a copy of your credit report, check it for any mistakes. Check the balance information. You can only request for the credit bureau to remove the lien only when you have paid your bad debts.
- Contact the tax office: Contact your tax office to confirm for any outstanding balance and pay off whatever is left. If you have not paid your debts, you can ask for repayment plan so that you can pay your debt in full.
- File for a dispute: If you are going to file for a dispute with the IRS, they provide a program for people to request for a withdrawal of your tax lien.
You can qualify if you have been in compliance for the past 3 years and if you are current in all your payments. Once everything is clear, make sure that you file the necessary paperwork and submit them to the IRS including an explanation of why you need the lien withdrawn.
It is possible to remove tax liens from the credit report and once this has been removed, it will be easier for you to improve your credit score so that you can get the loan that you need. This will also help you pass most rental screening process in place by landlords.