Liens are often thought of as terrible for credit scores, but some types of liens have no effect on a credit score. Whether a lien affects your credit score depends on why you have a lien on your property. Even if you have a lien that affects your score, such as a tax lien, you might be able to get it off your record.
Types
The liens that affect your credit occur with an unpaid debt to the government, such as a lien due to outstanding property tax or federal tax. A mechanics lien, which usually occurs in conjunction with home improvement repairs, affects the title to your home but not your credit, according to Credit Score Quick. If you cannot or refuse to pay for your home improvement repairs, the contractor can use the mechanics lien to secure a judgment, which will affect your score.
Effect
Credit reports are unique, so you cannot calculate exactly how much damage a tax lien could do to your score. Similar negative items, such as a short sale or foreclosure, cost between 85 and 160 points, according to CNN. The better your score, the more room a lien has to drop it, whereas already bad scores take the smallest hit.
Time Frame
Tax liens are considered the most serious offense on a credit report and stay on it for 15 years if left unpaid. For comparison, bankruptcies stay up to 10 years and all other negative items impact your report for seven years. Private liens that appear on a report stick for seven to 10 years.
Tip
You might be able to negotiate with the lender to remove the lien if you pay the debt in full. Alternatively, disputing the lien several months after successful repayment may work in case of a tax lien, because the IRS often does not even bother replying to credit agency inquiries once you settle your debt, according to Carreon and Associates.
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