One of the most famous founding fathers was Benjamin Franklin, a statesman of infinite statements worth quoting. Of his witticisms, the most well known is,In this world nothing can be said to be certain, except death and taxes. To those under a tax lien, this little glib turn of phrase seems more a depressing commentary rather and a witty remark. It can cause some serious economic distress to be dealing with your own bills, as well as the burden as back taxes.
A tax lien also causes no small amount of damage to your credit score. This makes sense, as that score is a figure based on how likely or unlikely you are to have trouble paying back a debt. If you’ve fallen behind on your taxes, it’s a pretty safe assumption that you’re not going to be able to pay back a credit card in a timely fashion. While all of this is logical and makes sense, it doesn’t feel good when you are trying to rebuild your finances from scratch.
There is a stigma that those that don’t pay their taxes are either impoverished or scoundrels. The truth is, sometimes it’s more about bad timing or not understanding how taxes operate correctly. Others have had their hard work fall simply because they were the victim of a scam or a dishonest accountant.
No matter how it happened, you need to be able to deal with the circumstances. If unpaid, a tax lien is on a credit report for fourteen years. That’s the longest period of time that any debt sits on your record, so it’s imperative that you take care of it as quickly as possible. Some might be asking if that lien, once paid off, raises your credit score. The answer isn’t particularly straightforward.
Even a paid lien remains on your credit report for seven years, and it’s not a good thing to see. Yes, it is better to have a paid lien than an unpaid lien. The problem is that having neither is remarkably better. That being said, the amount of damage a payed lien causes to your report is markedly less, and it doesn’t have as high of a priority as many other credit blemishes. If your tax lien was paid off two or three years ago, your present day activities have a lot more impact than your previous tax lien does.
If you don’t start seeing a turnaround in your credit scores after you’ve satisfied your lien, request a copy of your credit report. It is possible that the bureaus haven’t been properly informed that you’ve attended to your tax debt, and may still be penalizing you for it. It’s an easy thing to correct, and very problematic if left unchecked.
A tax lien isn’t the end of the world, but it is an important consideration for years after you’ve dealt with it. Paying it won’t benefit your tax score nearly as much as you may want, but proper spending will ensure that it quickly fades into irrelevance.