How does a lien affect your credit score?
Quick insights
- A lien is a legal claim against your property or asset to secure the payment of a debt.
- The three major credit bureaus no longer include tax liens or civil judgments on consumer credit reports.
- While a lien shouldn't directly impact your credit score, lenders might still find it in public records when you apply for new loans.
Discovering a lien on your property or assets may raise questions about its impact on your financial profile, including your credit score. Let's break down what a lien is and how it interacts with your credit report.
What is a lien?
A lien is a legal claim or right against a property or asset by a creditor. A creditor is a person or business you owe money to. If you don't pay your debt, the creditor could take action to enforce the lien, which can impact your ownership, such as forcing a sale to get their money back.
There are a few different types of liens. For example, if you take out an auto loan, the lender could have a lien on your car until you pay off the loan. If you fall behind on property taxes, the government might place a tax lien on your home. Similarly, if you have a lien on property, like a mortgage lien, the lender may have the right to foreclose on your home if you miss your payments.
Does a lien affect your credit score?
A lien shouldn't directly affect your credit score. In the past, unpaid tax liens and civil judgments could damage your credit. However, the three major credit bureaus—Experian™, Equifax® and TransUnion®—changed their reporting standards in 2018.
While the public record on the lien won’t appear on your credit report, any missed payments or collection accounts associated with that unpaid debt may be reported and could potentially lower your credit score.
How long do liens stay on a credit report?
Because the major credit bureaus removed liens from consumer credit files, liens shouldn't stay on your credit report at all.
However, liens are public records. Depending on your state laws and the type of debt, a lien could remain in public county or state records for several years or until the debt is fully paid.
Will a lien affect my credit in other ways?
Even though a lien shouldn't show up on your credit report, you might still wonder whether a lien may affect a loan application. While it shouldn't change your three-digit credit score, it could still impact your ability to borrow money.
When evaluating a large loan application, such as a mortgage, lenders usually consider more than just your credit score. They may also review information from public records and other sources to assess your overall creditworthiness. If they find an active lien, they could deny your application or require you to pay off the lien before they approve the loan.
Alternatively, lenders may request a subordination of an existing lien, which would require working with other lenders to agree to a lower lien position.
Here are a few ways a lien might impact your financial life:
- Borrowing challenges: Lenders may view you as a higher risk if you have outstanding public records.
- Property sales: It may be challenging to sell a home or vehicle with a lien on it until the debt is settled.
- Refinancing hurdles: An active lien could make it difficult to refinance an existing mortgage or auto loan.
Keeping track of your credit profile
Even if you aren't in danger of judgments or other negative marks, monitoring your credit score and overall financial health may be helpful. Banks or credit unions may offer account holders tools to assist you with this.
For example, Chase Credit Journey® is a free online tool for anyone 18 or older with a valid U.S. address and Social Security number (SSN), offering access to your credit score and personalized score improvement plans provided by Experian—no Chase account required.
In summary
While a lien shouldn't appear on your credit report or directly impact your credit score, it remains a public record that lenders might access. Resolving outstanding debts may help you avoid complications when applying for new loans. Staying informed and regularly monitoring your credit score can help you identify any errors or inaccuracies that might be lowering your score.
