How Removing A Tax Lien Affects Your Credit

Once a tax lien is withdrawn by the IRS, it can be removed from credit reports. Is it still something that has to be disclosed on future applications after withdrawal? If an application asks about prior tax liens, I assume I still have to say “yes,” right?

That’s not a common question on most consumer loan applications. “I don’t recall seeing that question on a credit card application, ” says Credit.com credit card expert Beverly Harzog. You aren’t likely to see that question on a mortgage application either. Mortgage applications require you to disclose if you are presently delinquent or in default on any Federal debt, but don’t ask typically ask about prior tax liens that have been satisfied.

But don’t be so sure that just because a tax lien no longer shows up on your credit report that it has disappeared altogether. Joe Kelly, president of ArcLoan.com says that his firm was recently helping a homeowner refinance when a tax lien made a surprise appearance. “The lien wasn’t on the credit reports, but it showed up in the property records as a lien against the property,” he explains. “The homeowner was required to either show proof it had been satisfied or pay it off before the new loan could be completed. ”

So the answer is, “yes,” you will need to answer truthfully if this question comes up. But it’s not likely that it will.