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Need advice on tax lien

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Anonymous
Not applicable

Need advice on tax lien

Hello everyone,

 

I am in underwriting and one condition was to pay off a federal tax lien from 2005.I paid it off and want to know if I send proof of payment to the CB so it can update as a paid tax lien will it drop my score or help my score.Any advice will be greatly appreciated.. 

Message 1 of 7
6 REPLIES 6
Familywantsahouse
Frequent Contributor

Re: Need advice on tax lien

You can file a form with the IRS to have it removed from your credit. I would think that'd be good for at least a few points, even though it's pretty old.

2/24 (Lender Pull) EQ 613, TU 553, EX 589
April EQ 633, My Fico TU 638, EX ??
Current EQ 643, TU 652, EX 633 (lender pull 5/11)
Goal (we made it!!)- Over 640 middle by 5/15
Message 2 of 7
Anonymous
Not applicable

Re: Need advice on tax lien

thanks for your response..i did fill out a form and send it to the IRS asking them to remove the tax lien but i havent heard back from them..the irs said i shoud hear back within 60 days..but in the meantime should i send the CB the lien satisfaction to show it as a paid account or should i just leave it alone..i dont want to send the proof of payment because i think it might drop my scores since the lien was from 2005..if it will help my scores i will send it to the CB..thoughts anyone????

Message 3 of 7
LondonMassey
Frequent Contributor

Re: Need advice on tax lien

I have  a paid tax lien on my report that was filed in 2008 and paid in 2010.  Given the age, satisfying the debt won't increase your score much if at all, BUT it won't hurt your score.  Tax liens are ugly little things to see on credit reports.  I just sent my request last week to have it removed from my report. According to a simulator I used, my score won't change at all once it's completely off my report.  Hopefully, it's lying and I'll instantly gain 100+ points, but I won't hold my breath. Smiley Happy

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Message 4 of 7
rckstrscott
Valued Contributor

Re: Need advice on tax lien


@Anonymous wrote:

thanks for your response..i did fill out a form and send it to the IRS asking them to remove the tax lien but i havent heard back from them..the irs said i shoud hear back within 60 days..but in the meantime should i send the CB the lien satisfaction to show it as a paid account or should i just leave it alone..i dont want to send the proof of payment because i think it might drop my scores since the lien was from 2005..if it will help my scores i will send it to the CB..thoughts anyone????



It will not help your scores at all.  A paid lien is the same as an unpaid lien in FICO scoring. -- The IRS will have it updated to show as paid, it takes about 30 days.. The lien should come off completely within 3-6 months since you sent in that form, and you will get point increases at that time. Sending something to the CRA is not needed at this point.. Just give your LO the lien satisfaction..

 

-scott

Starting FICO Score: October 2010: TU 498 | EQ: 502
Current FICO Scores:: May 2022: TU: 784 | EQ: 770 | EX: 790
Message 5 of 7
Anonymous
Not applicable

Re: Need advice on tax lien

I have to disagree about it not helping your score... before we started our mission I had to clean up several tax liens on my husbands report... (I kind of consider myself a little bit of an expert in it because of how many he had that needed cleaned up... Reasons they were there is a whole other story) His was mostly from 2002-2004..

Anyway... It does give your credit a slight increase. Not really a lot because the hardest hit was when they were first on there. I found that it increased his score about 5 points with each one that got changed to Satisfied/Released. If your letter for the tax lien says that it was paid off in 2010 they will update it to read that it was satisfied in 2010.

I did not see where any of them "hurt" his score by changing the status to Paid/Released/Satisfied.

 

But! Give your letter to the LO don't file it with the CB's just yet.. (I did my disputes with the CB's before we started the loan process) If you have an open dispute on your credit report they can not use it... If you don't need the score increase right now then just give a COPY of the letter to LO. Once things are said and done make sure you file the letter with the credit bureaus because it will not get filed if you don't do it... But, just don't dispute it with the CB's while you're in the process.. (Of course unless someone more qualified than me tells you to)

 

However... I want to add a little note: Everyone keeps referencing about the fact that IRS says if you pay the liens in full they will remove it from your report... This is only if the liens are on a Federal Level... If they are State Tax Liens they do not have to remove them..

 

(now before anyone takes offence to my "expert" comment... I meant it sarcastically)

Message 6 of 7
rckstrscott
Valued Contributor

Re: Need advice on tax lien


@Anonymous wrote:

I have to disagree about it not helping your score... before we started our mission I had to clean up several tax liens on my husbands report... (I kind of consider myself a little bit of an expert in it because of how many he had that needed cleaned up... Reasons they were there is a whole other story) His was mostly from 2002-2004..

Anyway... It does give your credit a slight increase. Not really a lot because the hardest hit was when they were first on there. I found that it increased his score about 5 points with each one that got changed to Satisfied/Released. If your letter for the tax lien says that it was paid off in 2010 they will update it to read that it was satisfied in 2010.

I did not see where any of them "hurt" his score by changing the status to Paid/Released/Satisfied.

 

But! Give your letter to the LO don't file it with the CB's just yet.. (I did my disputes with the CB's before we started the loan process) If you have an open dispute on your credit report they can not use it... If you don't need the score increase right now then just give a COPY of the letter to LO. Once things are said and done make sure you file the letter with the credit bureaus because it will not get filed if you don't do it... But, just don't dispute it with the CB's while you're in the process.. (Of course unless someone more qualified than me tells you to)

 

However... I want to add a little note: Everyone keeps referencing about the fact that IRS says if you pay the liens in full they will remove it from your report... This is only if the liens are on a Federal Level... If they are State Tax Liens they do not have to remove them..

 

(now before anyone takes offence to my "expert" comment... I meant it sarcastically)


I suppose YMMV,  but I recieved 0 point increases from paying off multiple state and federal liens.. I was under the impression that the FICO score never factors in payment on public records. I have had multiple judgments as well, and this was shown true on those as well. Are you sure nothing else changed to increase the score by a couple points? I am not questioning you expertise, just trying to understand so I have a better idea myself.

 

I don't think anyone made any reference to a state tax lien, the OP indicated Federal. Federal is the IRS. That is why everyone is stating IRS in their posts.

 

You are correct, the IRS has no jurisdiction over state taxes, hence why I still have an Illinois state tax lien on my report haha

 

I think, although we have differing opinions on the FICO part, the crux of our opinion is similar, it won't HURT your score, and if it does anything at all, don't expect a huge point increase from just paying it, the removal is where you'd see potentially the greatest gain depending on the age.

 

-scott

Starting FICO Score: October 2010: TU 498 | EQ: 502
Current FICO Scores:: May 2022: TU: 784 | EQ: 770 | EX: 790
Message 7 of 7
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