Greetings, steinem!
Tax liens are placed on properties as a way of ensuring that the
property cannot be sold without the past due taxes first being paid --
either by the buyer or by the seller. These liens are also used as a
way to pressure property owners to pay the past due taxes.
A tax lien affects the property owner's credit rating the same way
that some other type of default or past due unpaid bill affects it:
the presence of a tax lien is considered a delinquent, unpaid amount,
and it will not only appear as a negative item on a credit report, it
will lower the property owner's overall credit score -- both of which
are used by lenders to evaluate a prospective borrower's
creditworthiness.
The way a tax lien on your property in California will affect your
ability to purchase a new home is that -- because of the negative
impact on your credit report and credit score -- it will make it much
more difficult, or maybe even impossible, to find a lender willing to
help you finance the purchase of a new home.
There is indeed a way to get a tax lien removed so that you can
(hopefully) find a lender willing to provide you with a mortgage to
buy a new property: paying the past-due taxes in full. Because the
presence of the tax lien on your credit report (and its effect on your
credit score) exerts pressure on you to pay the back taxes, the taxing
agency is not likely to be willing to remove it unless you first pay
them the full amount of (and any interest and penalties due for) the
past-due taxes.
Be aware that, even after the past-due taxes are paid, the existence
of the paid-off lien will probably still remain on your credit report
for up to 7 years. While the notation of the paid-off lien can still
have a negative effect on your credit score and on the willingness of
a lender to provide a mortgage, that negative effect will not be
nearly as bad as it is while the taxes are still unpaid and the lien
is still in place.
Please also be aware that "credit repair" companies which claim that
(for a fee) they can remove items from your credit report are, at
best, only doing what you can do for yourself for free -- and, at
worst, telling you a lie. The only way to remove a valid delinquent
tax lien from your credit report is to pay it off.
Your best bet is to get the back taxes paid as soon as possible, get a
receipt showing that you have paid the taxes in full, and persuade the
tax agency which placed the lien to remove it. Not only will this
increase the likelihood you will be able to find a lender willing to
give you a mortgage for a new property, it will enable you to sell the
property for which the lien was filed (if you wish to do so).
From Invest1to1.com's "Understanding credit reports":
"Your credit rating can affect every aspect of you life, from what you
can buy, what type of car you drive, to how much a loan costs and even
where you can live. It is important to maintain the best credit report
possible.
...Remember that to keep your credit score high you must have no loan
or credit card payments reported 60 days or more past due and no more
than two payments 30 days past due. Also note that utility companies
such as mobile phone providers also report your payment status to
credit bureaus. Fixing a problem on one bureau's report does not
impact the others, so be sure that you contact all three companies."
http://www.invest1to1.com/invest1to1/university/big/credit.html
From ClickMortgage's information on credit ratings:
"What information is contained on my credit report?
...Public Records - items that may affect your credit worthiness such
as judgments, bankruptcy, tax liens, etc..."
"How long does information remain on my credit file?
...Tax liens remain on the file for seven years from the date paid. If
they are not paid, they will remain on your report indefinitely..."
http://www.clickmortgage.ca/bg_creditrating.html
If your lien was filed by the IRS:
"1. IRS liens are filed at your county courthouse as legal claims
against real property...
3. IRS's policy is to file liens against all taxpayers who a minimum
of $5,000 in unpaid taxes...
5. IRS liens will show up on your credit report and will negatively
affect your credit rating.
6. IRS will not remove a lien unless the tax is paid in full. This
makes it very difficult to negotiate the release of an IRS lien.
7. You generally cannot sell real estate without IRS demanding some
or all of your profit on the sale.
8. IRS liens will stay on file at the county courthouse for ten
years."
http://www.taxnegotiations.com/liens.htm
Search Strategy
"tax liens" affect "credit rating"
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Before Rating my Answer, if you have questions about this information,
please post a Request for Clarification, and I will be glad to see
what I can do for you.
I hope this Answer provides you with exactly what you needed!
Regards,
aceresearcher |
Clarification of Answer by
aceresearcher-ga
on
28 Dec 2002 00:27 PST
steinem,
Researcher expertlaw has reminded me that, on occasion, creditors who
are owed old debts may be willing to negotiate a settlement for a
lower amount than the total debt outstanding, if it means that they
are more likely to actually get paid. In your case, this is certainly
something to consider. Some helpful information on this may be found
at Your Credit Source's section on "Debt Reduction Settlements" at:
http://www.yourcreditsource.org/your_credit/debt_reduction_settlements.html
Attorney Burton J. Haynes, Esq, has authored a couple of helpful
articles about negotiating with the Internal Revenue Service:
"Negotiating Installment Agreements"
http://www.unclefed.com/AuthorsRow/BJHaynes/install.html
"Negotiating Offers In Compromise"
http://www.unclefed.com/AuthorsRow/BJHaynes/oics.html
Thanks to expertlaw for their expert assistance!
Best wishes,
aceresearcher
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