Why Didn’t My Credit Scores Go Up After I Paid My Tax Lien?

judgmentsI received the following question regarding the influence of paid tax liens on credit reports and scores.

“John, I had a Federal tax lien in 2010. I paid it in 2012. I was under the impression that my credit scores would go up considerably now that the lien has been paid. Well, I was wrong about that. I pulled my VantageScore credit score and my FICO scores and also the free scores you can get from other websites and NONE of them have gone up in any significant way. Should I contact the credit bureaus about this?  It’s still on my credit reports.”

No, you should not contact the credit bureaus about this issue. They have nothing to do with your problem.  Here’s the deal..

The fact that your tax lien has been paid is great.  It should, and probably is, showing up as being “released.” But, that’s where it ends and the credit bureaus will maintain the reporting of that lien for 7 years from the date it was released. So, in your case we’re talking some time in 2019.

The reason your scores didn’t go up is because the released lien is still on your credit reports. And, even released liens are considered derogatory by pretty much every credit scoring system currently being used. For your scores to improve in any meaningful way you are likely going to have to get the lien removed, and that’s assuming it is the ONLY negative item on your credit reports.

Normally I don’t advise people to challenge accurate information on their credit reports. But, in this case I am going to do just that…but not before you do a little work yourself beforehand.

I wrote that article a couple of years ago and it outlines the step by step process you have to take in order to get the tax lien withdrawn, not just released. The credit bureaus do not maintain withdrawn liens but they do maintain released liens. So, your project is clear…get the IRS to withdrawn that lien.  THEN you should contact the credit bureaus.

Also, read >  Federal Tax Liens in Chapter 7 Bankruptcy

Until that point your credit scores are going to likely be influenced by that lien. And, if the lien is the only negative item on your credit reports then clearly it’s going to be very problematic.   Good luck!

JRU on 60 Mins SetCredit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, founder of www.creditexpertwitness.com and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  You can follow John on Twitter here.