Many consumers are unaware that public records--bankruptcies, foreclosures and tax liens--are reflected in credit reports maintained by Experian, Equifax and TransUnion, the three major consumer reporting agencies (CRAs). There are two circumstances in which you can successfully dispute a tax lien that's reflected on your credit report. One such instance is if this item of information has been erroneously entered into your report and you were never subject to a tax lien. The second is when the negative record reaches its expiration date, in which case it should automatically drop off of your report. Tax liens, however, can remain in your credit history indefinitely.
Step 1
Pay the tax lien. Make sure that if you were subject to a tax lien, it has been paid. However, even after you pay the lien, note that this negative information will continue to be reflected on your credit report for another seven years after the payment date. If the lien goes unpaid it may remain in your history forever. According to the financial experts at Credit.Com, this applies to city, county, state, and federal liens.
Step 2
Examine all three of your credit reports from the three CRAs, not just one. If erroneous information is contained in your Experian report, it could well be reflected in your Equifax or TransUnion report as well. The Federal Reserve Board points out that under the Fair Credit Reporting Act, you are entitled to a free credit report once every year and more frequently if a company takes adverse action because of negative information in your credit history, such as a credit card issuer or prospective employer. The official website set up by Congress where you can obtain your three reports is AnnualCreditReport.Com (see Resources).
Step 3
Make sure that the negative information on your report, in this case a tax lien, is either clearly erroneous or should have expired. For example, if your tax lien was only released three years ago, you must wait another four years before the item falls off your report. But if an expired negative record continues to linger on your report and you have adequate proof that the lien was released more than seven years ago, file a dispute with the CRA in question.
Step 4
Put it in writing, advises the Federal Citizen Information Center. Write a letter to the CRA informing them that you believe the tax lien to be in error or that the record should have expired, as applicable to your situation. It's wise to enclose a copy of your credit report with the tax lien highlighted. Supporting documentation providing proof that the lien was released can expedite the dispute process. Make copies of your letter and enclosed documentation and send it to the CRA certified mail, return receipt requested. (For a list of CRA mailing addresses, see the Resources link below.)
Step 5
Give the CRA around 30 days to investigate your dispute. If the tax lien is removed from your report (and even if it is not), you will be notified in writing. The CRA will provide you a copy of your revised credit report if information regarding the lien is removed. If negative information is not removed, the FRB points out that under the Fair Credit Reporting Act, you are entitled to submit a brief 100-word (or less) statement to the CRA to be included with your credit report.
Tips and Warnings
- Unpaid tax liens remain on your Equifax and TransUnion credit reports for seven years after they are released; Experian, on the other hand, allows an unpaid tax lien to expire after 10 years.
Things You'll Need
- Copies of your credit report
- Copies of supporting documentation indicating that a tax lien has been released (paid)
- Computer & printer
- Envelope(s)
- Cash for certified mail service
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