How to Get a Tax Lien Removed from Your Credit Report

Posts Tagged ‘credit score’

How to Get a Tax Lien Removed from Your Credit Report

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If you fail to pay your taxes in a certain period of time, the IRS will report the issue to the credit bureaus and it will appear as a tax lien on your credit report. Tax liens can significantly lower your credit score and put you in a poor position to obtain credit in the future. If your credit score was already in the low to middle range, you could be setting yourself up for several months or years of rejected credit applications with a tax lien in your credit history. Fortunately, there are some ways to have this removed and clean up your credit report!

Here’s what you need to do to have a tax lien removed from your credit report:

Settle your taxes as quickly as possible. The IRS will accept payments to settle your taxes and even an offer in compromise (OIC) if you can show that you truly are unable to pay your taxes because of your financial situation. Whatever the case may be, seek out the help of an experienced and qualified tax attorney so that they can create a plan to pay off that tax debt as quickly as possible.
Wait for a response from the IRS. Within 30 days of receiving your payment for taxes owed, the IRS will send you a Certificate of Release of Federal Tax Lien read IRS Publication 1450 in the mail. If you don’t get this document in the mail within thirty days, feel free to contact the IRS directly and confirm that they did indeed receive the payment. This document serves as proof that the taxes have been paid and that the tax lien no longer needs to be on your record.
Contact the credit bureaus. You will need to contact the credit bureaus on your own to have the tax lien removed from your credit report. Even though the lien has been paid, the fact that you had the lien on your record in the first place will stay on your credit report for seven years. You do have the right to ask the credit-reporting agencies to remove the lien since you have paid it off in full. You can send them a copy of your Certificate of Release of Federal Tax Lien in the mail as proof. The best way to contact the credit bureaus with this request is to submit a professional letter asking to have the lien removed, and to provide a copy of the IRS certificate.

Restoring your credit after a tax lien on your report can be challenging, so make sure you are making every effort to pay all of your bills on time and are checking your credit report at least once per year for any errors or mistakes that could be hurting you. It is possible to repair your credit after a tax lien has been paid off in full, but it can take time. Take the steps to become more financially responsible so that you can increase your credit score as quickly as possible.

The Story of Bill and Skip: Why Your Credit Score Matters

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Author: The Money Coach

Here’s a tale about two 40-year old guys who are best friends. We’ll call them Bill and Skip. From the time they were teenagers both Bill and Skip dreamed of becoming successful corporate sales executives and enjoying the finer things in life—you know, nice house, sporty cars, designer suits, the whole works. Bill and Skip attended the same college, and both graduated with business degrees and a 3.5 grade-point average. They married around the same time, and each now has two kids of the same ages, 7 and 5. Since Bill and Skip are sports buffs, neither one smokes; in fact, the two of them are in great shape because they work out together every weekend at the local gym. Although Bill and Skip both work for the same Fortune 500 company, that’s where the similarities end.

You see, Bill always pays his bills on time. He’s made it a point in his life to handle his financial affairs responsibly. So he keeps his debts at manageable levels, always keeps up with his obligations, and safeguards his credit in every way he can. In fact, he makes payments on his $400,000 mortgage ten days ahead of the due date. Skip, on the other hand, plays fast and loose with his finances. He skips Visa payments every now and then, sometimes just because he’s too busy to get stamps from the post office. Because he’s on the road so much, Skip often forgets to mail his cell-phone payment when it’s due. “What’s the big deal if I pay it a couple days late?” Skip thinks. “They’re still going to get their money.” In addition, Skip has missed making his mortgage payment on time twice in the last year, once when he was on vacation and another time when he was traveling for a business conference. The same thing happened with his car payment for the Lexus he drives. Unfortunately, Skip didn’t have automatic payments set up online to make those payments in his absence. “I can’t be bothered with that. Those things are too complicated, and besides I’m too busy,” he said when his wife suggested putting their bills on automatic payment plans to avoid those constant late fees. Skip’s wife was tired of arguing with him about their money problems, so she just let it go. But when it came time for Bill and Skip to get loans and insurance, the wayward Skip was shocked at how much he had to pay. When the two friends compared notes, here’s what they found:

Mortgages—Although Bill and Skip both took out 30-year, fixed-rate mortgages for $400,000, Bill’s monthly payment is $2,300 a month while Skip’s is $2,800. Compared to Skip’s, Bill’s mortgage payments are $6,000 less per year, saving Bill $180,000 over the life of his loan.
Auto Loans—Both made equal down payments to finance their late-model Lexus automobiles, but Bill’s payment is $400 a month while Skip pays $550. By the time the cars are paid off in five years, Bill will have doled out $9,000 less than Skip. And since the average American family buys seven new cars in a lifetime, that $9,000 gets multiplied seven-fold for a total lifetime savings of $63,000.
Credit Cards—Bill and Skip are carrying $3,000 balances on their Visa credit cards. However, since Bill has perfect credit, his interest rate is just 8.9%; Skip’s is at the default rate of 28.99%. So Bill pays around $27 in monthly interest while Skip is hit with charges of $87 each month. In five years’ time Bill saves $3,600 in interest costs. At this rate, over the next 30 years, Bill will pay $108,000 less in finance charges.
Life Insurance—Both men bought $500,000 whole-life insurance policies. Bill’s costs him $320 a month or $3,840 yearly; Skip’s costs $410 a month or $4,920 annually. Over the course of 40 years, Bill will save $43,200 by paying $153,600 for insurance compared to $196,800 spent by Skip.
Auto Insurance—Though both own cars of an identical year, make, and model, Bill’s insurance costs $1,800 a year while Skip’s runs $2,340. Bill’s five-year savings on auto insurance is $2,700 ($9,000 paid by Bill versus $11,700 paid by Skip). Over 35 years Bill’s savings add up to $18,900.

A Promotion Won and Then Lost

All told, Bill saves at least $413,000 because of his lifetime of perfect credit. That’s nearly a half million dollars that Bill keeps in his bank account, simply for paying his bills on time and managing his credit wisely. But the financial benefits don’t end there.

Bill and Skip are also up for promotion to Senior Vice President of Sales. Even though they’re competing for the same position, they’re still buddies. Bill tossed his hat into the ring for promotion not knowing that Skip was going to go for it. When Bill found out that Skip was interested in the job, Bill thought about withdrawing his name. “The truth of the matter is that you are the better salesman,” Bill told Skip, adding that “Everyone knows you’re a shoe-in for the promotion because of your outstanding sales record. You deserve a promotion.” As it turns out, the boss saw it that way too. After interviewing four candidates for the job, the boss picked Skip. But because the job paid $100,000 annually, the human resources department performed its customary background check, running Skip’s credit report in the process. Within 24 hours Skip’s promotion had been rescinded. The high-paying job ultimately went to Bill, who received a $25,000 raise. Neither guy thought it was fair, but as Skip’s boss said upon withdrawing the promotion, “Hey, it’s nothing personal. It’s just business.”

Apparently the company figured that bad credit meant that Skip wouldn’t be as trustworthy and might be tempted to steal customer funds if his own money problems worsened. Skip went home seething mad. He consulted a lawyer to see whether his boss could legally offer him a job and then take it back because of Skip’s bad credit. The attorney advised Skip that unfortunately what the employer had done was perfectly legal. When Bill went home, he was ecstatic. He did the math and realized that over the next 25 years the extra $25,000 in salary meant he would generate $625,000 in additional income before retirement, not including any other raises. As you can see, paying his bills as agreed allowed Bill to save and earn a total of $1,038,100 more than poor Skip, who continued to skip payments and wound up constantly penalized for his lousy, bad credit.

Excerpted from Perfect Credit: 7 Steps to a Great Credit Rating

5 Surprising Things That Hurt Your Credit Scores

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Author: The Money Coach

We all know that making late payments or having credit card accounts in collections can hurt your credit scores. But you might be shocked to learn that a lot of other seemingly innocent actions can also negatively impact your credit rating.

Here’s a list of five surprising things that can lower your credit scores — and keep you from having a stellar credit report.

Renting a Car With a Debit Card

I learned about this credit-busting issue the hard way: after I rented a car in 2009 from Avis using my debit card.

I thought I was being responsible by using a debit card linked to my checking account. After all, I figured, a debit card would help me avoid unnecessary credit card debt bills and stick to my zero debt lifestyle.

But noooooo. In the fine print of its rental agreements, Avis includes a clause that basically says the company has the right to pull your credit report if you use a debit card as opposed to a credit card. In all fairness, most other car rental companies have contracts with the same clause.

This makes absolutely no sense to me, especially since under the Fair Credit Reporting Act, companies that pull your credit rating are supposed to have a “permissible purpose” – as is the case when you’re seeking a loan, credit or employment.

But renting a car doesn’t fit into any of these categories. Obviously, car rental businesses see it differently. They want some extra protection for the privilege of “loaning” you a vehicle. If that’s the case, instead of pulling credit reports, why don’t they simply ask debit card users for upfront deposits, just as they do with those who pay by cash or credit card?

In any event, after I made the mistake of using my debit card to pay for my Avis car rental, the next day I received an email alert from my credit monitoring service. It notified me that there was an “inquiry” on my credit report from Avis and that my FICO credit score had dropped by 14 points. Needless to say, I’ve never used a debit card at a car rental company since. Read the rest of Lynnette Khalfani-Cox’s article on WalletPop.

How Will a Foreclosure Affect My Credit Score?

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Author: The Money Coach

If you’re facing foreclosure, you may be wondering how this will affect your credit score. Missing payments on your mortgage and other bills may have already dropped your credit score by several points, and when you reach foreclosure status, you will notice a significant drop in your credit rating. If you’ve been struggling financially for a while, the foreclosure could have an even more significant impact on your credit standing now, and in the future.

Effects of a Foreclosure on Your Credit Report

Your FICO score is the most commonly-used credit score by most lenders, and credit bureaus have shared how many points you lose when you’re dealing with a delinquent mortgage. Here are the average ranges of points you lose when you’re in foreclosure:

40 to 110 points when payments are 30 days late
70 to 135 points when payments are 90 days late
85 to 160 points when you’re dealing with a foreclosure, short sale or deed-in-lieu

Even if you had been making your mortgage payments on time for several months and years before dealing with financial distress, the banks will report missed payments to the credit bureaus right away.

For many people facing foreclosure, the mortgage isn’t the only bill that’s late. If you are also late on your car payments, have been skipping student loan payments or are late on credit card payments, your credit score will drop within a very short period of time.

Sadly, the combination of a foreclosure and defaulting on other loans often leads borrowers down the road of bankruptcy. Declaring bankruptcy will do extensive damage to your credit rating and, like a foreclosure, will also stay on your credit report for several years.

Erasing a Foreclosure from Your Credit Report

A foreclosure will drop off your credit report automatically within seven to ten years, depending on the state you live in. When you reach the seven-year mark, make sure you get in touch with the credit bureaus to make sure that they are still not reporting the foreclosure. You may need to send them a written notice in order to have the foreclosure removed after it has expired. It’s also important to contact your original lender to have them remove the record from your credit report. Lenders are not always willing to go out of their way to do this, so a written notice and persistence may be needed to clean up your credit report.

If you do decide to apply for a loan when you have a foreclosure on your credit report, the lender may be willing to offer you loan but at a higher-than-average interest rate. In most cases, you will find it difficult to get another mortgage at an attractive interest rate, because of your credit history.

How Long Will a Bankruptcy and Foreclosure Stay on My Credit Report

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Author: The Money Coach

When you miss a credit card payment, mortgage payment or end up going into deep debt that you can’t realistically pay off within a

reasonable amount of time, you put yourself at risk for bankruptcy or foreclosure. Many people who end up filing for bankruptcy or are dealing with foreclosure find it difficult to apply for a loan or get a credit card shortly after everything has been finalized. This is because information about your bankruptcy and foreclosure will stay on your credit report for several years. In a lender’s eyes, you are a “high risk” candidate and many lenders will simply deny you for a loan because your credit history.

Many people are confused about the Statute of Limitations on certain types of debt. It’s important to remember that the Statute of
Limitations has absolutely nothing to do with the length of time that something stays on your credit report.

Bankruptcy and Your Credit Report

Filing for bankruptcy is a drastic measure but sometimes you don’t have any other choice. Bankruptcy information stays on your credit report for up to 10 years. Bankruptcy is a legal way to discharge your debts, but filing bankruptcy will have the most negative effect on your credit score. It’s always in your best interest to make sure that information about the filing are reported to the credit bureaus correctly. Keep in mind that according to FICO, a bankruptcy that is “Dismissed” does not actually lower your FICO score. When your bankruptcy has a “Disposition” status, it will impact your credit rating. When you are able to work on improving your credit rating, make sure that you take steps to dispute any information that is inaccurate or outdated so that it does not show up on your public records.

Understand Your Personal Bankruptcy Options, Free Bankruptcy Evaluation

Foreclosures and Your Credit Report

When a foreclosure gets reported to the credit bureaus, you can expect your credit score to drop by as much as 150 points. In most cases, borrowers who have dealt with foreclosure are granted “subprime status”, which means they aren’t eligible for attractive interest rates in the near future. Like bankruptcy, a foreclosure is considered to be a serious delinquency and will stay on your credit report for up to seven years from the date of filing. Even when you meet a lender’s requirements based on a past foreclosure, an underwriter will still see you as a risky candidate for another mortgage and you may find it very difficult to
get the loan you want.

It is possible to have the foreclosure removed from your credit report, but this can be a very lengthy process and will require some
strong negotiation skills.

When you have bankruptcy or a foreclosure in your credit history, it’s even more important to make sure you are keeping up with other bills and working towards repairing your credit. You may need to wait several years before your credit score improves after the negative impact from these credit problems, but you will be able to remove them from your credit history completely within seven to ten years.

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Posts Tagged ‘credit score’