Do Tax Liens Show Up on Your Credit Report?

If you have a tax bill that you ignore or refuse to pay, the government agency that issued it could file a tax lien against you. That can be the Internal Revenue Service (IRS) or a state or local tax agency who has a legal claim to use your property to satisfy the debt. It means they’ll get paid first if you sell your property. A common question is whether tax liens show up on your credit report.

Do tax liens show up on your credit report?

The good news is that tax liens no longer appear on credit reports. In 2018, they were removed by all three major credit bureaus. Civil judgments, which indicate that a consumer owes court-ordered debt, were also removed. So if you do have a tax lien or civil judgment against you, those records will not appear on your credit report. They also do not affect your credit score as calculated from your Equifax, Experian, or TransUnion report.

Why tax liens were removed from credit reports

The credit bureaus agreed to new reporting standards intended to keep inaccuracies from ending up on consumer credit reports. Called the National Consumer Assistance Plan, these standards came out of a March 2015 settlement between the three major credit reporting bureaus and more than 30 state attorneys general.

As part of the settlement:

• A civil public record, like a tax lien, could no longer appear on a credit report unless it included a name, address, and Social Security number or date of birth to prevent identity mixups.
• Experian, Equifax, and TransUnion were required to refresh this information at least every 90 days.

Today, the only public record that will appear on a credit report is a bankruptcy. Civil judgments and tax liens are no longer included.

How tax liens can still affect your finances

Tax liens can still have a significant impact on your financial well-being in three key ways.

Property liens and asset seizure

If your federal tax bill remains unpaid, the IRS may take further action by initiating a tax levy. This involves seizing your assets to satisfy your outstanding balance. That can include real estate, cars, wages, tax refunds, and money you have in a checking account.

However, you can avoid a tax levy if you’re experiencing economic hardship or have entered into an installment agreement with the IRS. Just be aware that state tax agencies can also seize your property.

Difficulty getting approved for loans or mortgages

Tax liens are public records. Qualifying for new loans or lines of credit may be difficult if the lender runs a search and discovers an active lien against you. That may raise concerns about your financial stability. It can be especially challenging if you’re trying to refinance a mortgage on a property that’s attached to a tax lien.

Potential issues with employment and housing

If a potential landlord or employer discovers a tax lien while running a background check, that could present a problem. Every case is different, but seeing a lien could make them hesitant to work with you. A landlord may worry about your ability to pay your rent on time. An employer may pause if you’re interviewing for a job that requires you to manage financial accounts or handle money.

Read more >> How paying your taxes late affects your credit

What to do if a tax lien still appears on your credit report

All three major credit bureaus have completely stopped including tax liens on credit reports, but here are some steps you can take to dispute other inaccurate information.

Check your credit reports for errors

Request your free credit report from all three credit bureaus at AnnualCreditReport.com as often as weekly. Another option is to create an online account with each bureau and pull your reports individually. Review each one carefully to ensure names, addresses, open and closed accounts, and hard inquiries are accurate. You might come across incorrect account information, duplicate accounts or accounts you don’t recognize.

Dispute inaccurate information

You can dispute credit report errors directly with each credit bureau online, over the phone, or by mail. Just be sure to include any supporting documentation that may be relevant, whether that’s an updated account statement or correspondence you’ve had with creditors.

Kikoff offers an AI-powered tool that helps you find and dispute errors on your credit report, generating personalized dispute letters with just a few taps and tracking progress as your dispute moves forward.

Resolve the tax debt

This isn’t related to your credit report, but it’s an important step. Resolving your tax debt can get you moving in the right direction. If your balance feels overwhelming, contact the tax agency that issued the lien to clarify your options. For example, the IRS offers short- and long-term payment plans with installments and flexible timelines.

Consider talking with a financial advisor, credit counselor, or other professional for guidance specific to your situation. The National Foundation for Credit Counseling (NFCC) offers free or low-cost counseling at 1-800-388-2227.

Read more >> How credit report disputes affect your credit

How to protect your credit while dealing with tax debt

The last thing you want is to jeopardize your credit while tackling your tax bill. Here are some simple ways to protect your credit:

• Revisit your budget and make room for your tax payments. You might consider reducing or eliminating bills to free up more cash each month.
• Continue paying your bills on time every month. Your payment history makes up 35% of your FICO Score.
• Avoid accumulating new debt.
• If possible, pay down credit cards and other revolving debt to reduce your credit utilization ratio.
• If your tax bill feels unmanageable, see if it’s possible to modify your payment plan.

Read more >> What’s the importance of on-time payments on your credit?

Bottom line

Tax liens don’t appear on your credit report, but the tools for resolving tax debt often depend on it. Personal loans to pay the balance, a lower rate on one you already have, refinancing to free up cash — a strong credit profile qualifies you for lower rates and stronger terms.  

Kikoff's Credit Account is free and reports your on-time payments to all three credit bureaus, so you can start building a record before you need it.