Want To Make A Tax Lien Disappear?

On February 24th the IRS announced new policies regarding the collection of unpaid taxes and liens.   As you know, an unpaid tax lien can remain on a credit file indefinitely per the Fair Credit Reporting Act and even a PAID lien would remain on your file for an additional 7 years and the status would report as “released”.  A “released” tax lien affects your credit score just as negatively as an unpaid tax lien.  But now, if the tax payer pays their liens “in full” the IRS will “withdraw” them.   Simply put, this paid in full item will be completely removed from your credit report.  This new policy does not apply to tax settlements—only FULL PAYMENT of the lien. 

So what does this mean for consumers’ credit reports?  More than likely a substantial increase in credit scores for those who have the ability to pay their tax liens in full and have them completely removed from their credit report.  This new policy would make tax liens the only derogatory item on a credit report to be removed once it has been paid.  Other derogatory debts such as collections, foreclosures, bankruptcies, repossessions, and defaulted credit cards will still remain on your credit file even after being paid.  

Ironically this type of “pay for deletion” scenario has generally been  frowned upon by the credit reporting industry, as many feel that by deleting this lien altogether once paid, waters down the actual credit profile of the individual.  Credit scores are an indicator of credit risk.  Completely removing a previously unpaid tax lien, doesn’t give the full picture of consumers past credit, and therefore accurately portray their true credit risk to future lenders. 

Once paid in full these tax liens aren’t automatically removed from your credit report.  You must contact each credit bureau, Equifax, Experian and TransUnion, and request it be withdrawn from your credit report. 

For additional information on how to contact the 3 Credit Bureaus, please visit http://mcmf.net/MCMF_CreditLink5.html


About jenniferhamby

Jennifer Hamby, Executive Vice President of My Credit My Future, has worked in the financial sector since 1996. She is dedicated to educating consumers on financial education and responsibility. Having worked in Data Facts’ Nashville office since 2007 as an account executive, Hamby realized the need for financial education that was informative, yet easy to understand and attainable. Partnering with both Junior Achievement, and Tennessee Jump$tart, in providing financial education, opened her eyes to the tremendous benefits in providing financial literacy and resources for consumers to aid in making better financial decisions.
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